Chagee: Brewing Big Dreams, Serving Cold Reality

2025-04-22 10:00:14 ET

Summary

• We are bearish on Chagee (CHA) due to limited near-term growth, intense domestic competition, and unfavorable macroeconomic conditions in China.
• CHA's premium positioning is vulnerable amid China's consumption downgrade, with consumers favoring value-for-money brands like Mixue, Luckin, and Cotti.
• Global expansion is unlikely to offset domestic weakness, with decelerating growth and unclear differentiation in overseas markets.
• Geopolitical risks, including potential US delisting, further compound the downside risk, with a projected 17% decline in valuation to $27/share.

We are bearish on Chagee ( CHA ), a Chinese tea brand chain that recently went public in the US.

Although the company has the largest network of premium, freshly-made tea locations across China, with over 6,000 stores, we believe that near-term growth is limited and that the company could see valuation de-rate in the coming quarters due to a number of macro and micro factors....

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