Intrinsic Value Mixue Group (2097.HK)

• Previous Close: HK$397.60
• Intrinsic Value: HK$2,835.66
• Upside potential: +613%

Stock Valuation Context

Business Model And Market Position

Mixue Group operates as a leading value-focused beverage chain specializing in affordable fruit drinks, tea beverages, ice cream, and coffee products across China and international markets. The company employs a franchise-driven revenue model, generating income through franchise fees, ongoing royalties, and the sale of ingredients, packaging materials, and store equipment to its extensive network of franchisees. This integrated approach creates multiple revenue streams while ensuring product consistency and brand standardization across all outlets. Operating in the highly competitive non-alcoholic beverage sector, Mixue has carved out a distinct market position by targeting price-sensitive consumers with its low-price, high-volume strategy. The company's core brands, Mixue and Lucky Cup, have achieved significant penetration in lower-tier Chinese cities and expanding Southeast Asian markets, leveraging economies of scale to maintain cost leadership. Mixue's comprehensive support system, including IT services and supply chain management, strengthens franchisee relationships and enhances operational efficiency, contributing to its rapid store expansion and market dominance in the value segment of the beverage industry.

Revenue Profitability And Efficiency

Mixue generated HKD 24.8 billion in revenue with net income of HKD 4.4 billion, demonstrating strong profitability margins. The company's franchise-focused model drives operational efficiency through standardized processes and scale advantages. Robust operating cash flow of HKD 6.0 billion indicates effective working capital management and sustainable business operations.

Earnings Power And Capital Efficiency

The company delivered diluted EPS of HKD 11.77, reflecting substantial earnings power from its extensive store network. Capital expenditures of HKD 1.4 billion support continued expansion while maintaining disciplined investment. The franchise model enables high returns on capital through limited direct infrastructure investment and leveraged growth via partner networks.

Balance Sheet And Financial Health

Mixue maintains a strong financial position with HKD 4.3 billion in cash and minimal total debt of HKD 92.6 million, resulting in a net cash position. This conservative capital structure provides significant financial flexibility for expansion and operational needs. The low debt level indicates prudent financial management and reduced financial risk.

Growth Trends And Dividend Policy

The company demonstrates aggressive expansion capabilities with international presence across 12 countries. Despite strong cash generation, Mixue maintains a zero dividend policy, reinvesting all earnings into growth initiatives and market expansion. This aligns with the company's growth-focused strategy and rapid store network development phase.

Valuation And Market Expectations

With a market capitalization of HKD 148.3 billion, the market values Mixue at approximately 6.0 times revenue and 33.4 times earnings. The negative beta of -1.31 suggests the stock behaves counter-cyclically to market trends, potentially reflecting its value-oriented consumer positioning during economic uncertainties.

Strategic Advantages And Outlook

Mixue's competitive advantage lies in its scalable franchise model, supply chain integration, and dominant position in value beverage segments. The company's international expansion strategy and digital capabilities position it for sustained growth. Continued penetration in developing markets and product innovation should drive future performance, though competition remains intense in the beverage sector.

Sources

Company descriptionFinancial metrics providedHong Kong Stock Exchange filings