Villeneuve Management | Equity Research | Consumer | April 2026
This report is based on CHAGEE's fourth-quarter and full-year 2025 results release, the related earnings call and public market data as of 9 April 2026. For institutional investors only; not investment advice.
1. Key Takeaways
CHAGEE's 2025 results show a company choosing to reset at home while building a second growth engine abroad. Reported profit fell sharply, but the cash position strengthened and the new franchise model is designed to make the business more resilient.
Overseas is the new engine, from a small base. Overseas GMV rose 84.6% year on year to RMB371.9 million in 4Q25, about 5% of total GMV.
- The business model is changing. CHAGEE is moving from a raw-material supply model to a GMV-based revenue-sharing partnership with franchisees, so that risk and reward are shared.
- Greater China is under pressure. Greater China GMV fell to RMB6,951.0 million in 4Q25 from RMB7,975.7 million a year earlier, and management cited a 25.5% year-on-year decline in same-store sales.
- GAAP profit dropped on transformation costs. Full-year GAAP net income was RMB1,186.3 million, down from RMB2,514.6 million, and 4Q25 included about RMB320 million of restructuring costs.
- The balance sheet is a cushion. Cash, restricted cash and time deposits reached RMB7,892.4 million, up from RMB4,868.7 million a year earlier.
- Our view: Hold. Management guides to broadly flat revenue and profit in 2026, and the shares already trade at a modest multiple of depressed earnings.
2. 2025 Financial Performance
2.1 Full-Year Results
- Total GMV: RMB31.58 billion, up 7.2% from RMB29.5 billion in 2024
- Net revenues: about RMB12.9 billion, up 4%
- Operating income: RMB1,347.2 million
- GAAP net income: RMB1,186.3 million, down from RMB2,514.6 million in 2024
- Non-GAAP net income: RMB1,909.9 million
- Average monthly GMV per teahouse in Greater China: RMB386,518
Full-year GMV and revenue still grew, but profit roughly halved as the company absorbed restructuring and reinvested in the business.
2.2 Fourth Quarter: The Reset Shows Up
- Total GMV: RMB7,322.9 million
- Net revenues: RMB2,974.5 million, down from RMB3,334.4 million in 4Q24
- Gross margin: 53.2%
- Operating loss: RMB35.5 million, against operating income of RMB642.5 million in 4Q24, largely due to restructuring costs
- GAAP net income: RMB33.9 million (1.1% margin), against RMB644.1 million (19.3% margin) in 4Q24
- Non-GAAP net income: RMB100.0 million (3.4% margin)
- Average monthly GMV per teahouse in Greater China: RMB337,358
Fourth-quarter net income was supported by interest income on cash and investments and by other income, mainly government grants. This was the twelfth consecutive quarter of net profitability.
3. Strategy: Three Shifts
Overseas expansion. Overseas GMV grew 84.6% year on year and 23.9% quarter on quarter in 4Q25. CHAGEE added a net 83 overseas stores in the quarter, bringing the overseas total to 345. The base is still small, so overseas growth does not yet offset domestic weakness, but it shows the brand travels.
Franchise model transformation. The company is moving from selling raw materials to franchisees toward revenue sharing based on GMV. This aligns CHAGEE's income with store performance and reduces the incentive to push supply into the network. The transition lowers near-term revenue visibility but should improve long-term franchisee health.
Domestic reset. With competition intensifying in China's premium tea segment, management is prioritising same-store sales recovery and product innovation over rapid store expansion. It also slowed new product launches during the restructuring. The network still grew, reaching 7,453 teahouses, up 15.7% from a year earlier.
4. Profitability and Costs
The sharp fall in profit has two causes: weaker same-store sales and one-off restructuring costs of about RMB320 million in the fourth quarter. The gap between GAAP and non-GAAP net income (RMB1,186.3 million versus RMB1,909.9 million for the year) reflects those items and share-based compensation.
Gross margin of 53.2% in 4Q25 shows the unit economics at the product level remain healthy. The key question for 2026 is whether lower restructuring costs and revenue sharing can lift operating margin back toward double digits once sales stabilise.
5. Balance Sheet and Capital Returns
Cash, restricted cash and time deposits of RMB7.9 billion (about US$1.1 billion) were up RMB3.0 billion from the end of 2024. On a rough basis this equals around 60% of the company's market value, although part of the balance is restricted and the figure is gross of obligations.
This gives CHAGEE room to fund the transition, expand overseas and potentially raise shareholder returns through dividends or buybacks. We would watch for any formal capital return policy.
6. Outlook for 2026
Management expects 2026 to be a year of high-quality growth, with revenue and profit broadly flat year on year and a focus on same-store sales recovery. We read this as a stabilisation year rather than a growth year.
What would change our view:
- Same-store sales declines narrowing for consecutive quarters
- Evidence that revenue sharing is lifting franchisee profitability
- Overseas GMV scaling toward a double-digit share of the total
- A formal capital return programme
7. Valuation
At a share price of $9.81 (9 April 2026), CHAGEE has a market capitalisation of about $1.9 billion based on third-party data. That is roughly 11x 2025 GAAP net income of about $170 million and about 7x non-GAAP net income of about $273 million. Gross cash of about $1.1 billion is close to 60% of market value.
Valuation framework:
- Primary: P/E on 2026 net income, assumed flat on 2025 in line with guidance
- Secondary: cash as a share of market value
- Cross-check: sensitivity to same-store sales recovery
Rating: Hold (Neutral)
Price target: $10.0 (12-month range $8.8–11.3)
We apply 10–13x to flat 2026 GAAP net income of roughly RMB1.2 billion, implying an equity value of about $1.7–2.2 billion, or $8.8–11.3 per ADS. Our target is about 2% above the reference price, so we see the current valuation as fair: cash limits the downside, while uncertainty over same-store sales caps the upside until a recovery is visible.
8. Key Risks
- Same-store sales. A longer decline than management expects would delay the earnings recovery.
- Competition. Price competition in China's premium tea market may keep pressure on traffic and pricing.
- Transition risk. The move to revenue sharing could disrupt franchisee relationships and reduce near-term visibility.
- Overseas execution. Rapid expansion in new markets brings brand, regulatory and operating risks, and the base is still small.
- Earnings quality. Interest income and government grants supported 4Q25 profit, and are less repeatable than operating earnings.
- Restructuring. Further one-off costs could widen the gap between GAAP and non-GAAP results.
9. Conclusion
CHAGEE is trading near-term growth for a more durable model. The deliberate slowdown in expansion, the franchise model change and the push overseas address real weaknesses, and the balance sheet gives the company time. But the evidence of recovery is not yet in the numbers. We rate the shares Hold and would become more constructive on two signs: narrowing same-store sales declines and an operating margin that rebuilds as restructuring costs fall away.
Sources: CHAGEE fourth-quarter and full-year 2025 results release; MarketBeat: Chagee Q4 earnings call highlights; Stock Taper: Q4 2025 earnings call summary; third-party market data. Share price data are as of 9 April 2026. RMB to US dollar figures use the rate implied in the company's release (about 7.0).
Disclaimer: This report is for information only and does not constitute investment advice or an offer to buy or sell any security. Past performance is not indicative of future results.
