Mixue Group: Lucky Cup Rebounds, Has Snow King Bottomed?---

On the afternoon of Mar 24 (Beijing time), Mixue Group (2097.HK) released H2 2025 results. Overall, H2 performance was mixed: revenue beat, but a lower GPM and higher admin expenses led core OP to come in slightly below street expectations. $MIXUE GROUP(02097.HK)

Key takeaways:

1) Revenue kept growing fast. Mixue posted H2 revenue of RMB 18.7bn (+32% YoY). While softer delivery subsidies weighed on SSS growth, rapid store adds sustained a solid overall pace, with a slight HoH decel vs. H1 (+39%).

2) Lucky Cup surged against the tide. Domestically, net adds were 7,075 stores in H2, accelerating vs. H1. After a strategic reset, Lucky Cup expanded at 'lightning speed' in H2; based on channel checks, it contributed at least 4,000 of the net adds. By region, growth leaned on lower-tier markets (Tier-2/3 and below).

Overseas stores fell by 266 vs. H1; Dolphin Research believes Mixue continued to prune overlapping, underperforming, and non-compliant locations in SE Asia. In addition, in Dec, Mixue officially entered N. America with simultaneous openings on both coasts in Los Angeles and New York.

3) SSS growth moderated. The company did not disclose detailed store operating metrics. Based on channel checks and narrower delivery subsidies in H2, Dolphin Research estimates low single-digit SSS growth, driven mainly by cup volume, with per-cup ASP roughly flat to slightly down.

4) GPM kept trending down. On costs, extreme weather pushed up key inputs like lemons and coffee beans more than expected in H2. In addition, a higher mix of delivery orders further pressured margins, resulting in a ~220bps decline in GPM to 30.7%.

5) Profit slightly missed the street. On selling expenses, the mature 'Snow King' IP and low-cost social traffic reduced reliance on traditional ads, with the selling ratio down 70bps to 6%. Admin expenses were temporarily inflated by one-off integration costs tied to the Oct acquisition of 'Fresh Beer Fulu Jia'. Net profit reached RMB 3.21bn (+25% YoY), modestly below expectations.

6) Financial snapshot:

Dolphin Research view:

Broadly, despite slower store openings and softer SSS for the core Mixue brand, the 'second curve' from Lucky Cup’s aggressive rollout kept top-line growth robust.

First, for the core Mixue brand, per Dolphin Research’s estimates, excluding Lucky Cup, new-store growth was only ~20%, implying an inevitable slowdown, which was anticipated. But SSS growth of ~2–3% trailed the sector’s ~5–7%, an underwhelming outcome.

Mixue’s online revenue mix is roughly 30%, lower than peers, so weaker delivery subsidies likely had a smaller impact on SSS. Dolphin Research believes the real driver was a lack of compelling winter products:

Given Mixue’s model prioritizes fast throughput and standardization with long shelf-life and easy logistics, winter demand skews toward freshly brewed hot drinks, which is less favorable to Mixue.

Turning to the true upside surprise, Lucky Cup in H2 not only achieved the '10k-store push' and became China’s third coffee brand to join the '10k-store club' after Luckin and Cotti, but also upgraded from lower-tier markets into Tier-1/2 cities. In Dolphin Research’s view, beyond the category beta, two pillars stood out:

1) To fix prior product weaknesses, Lucky Cup built a 400-person marketing team interfacing directly with R&D and shared the R&D team with the core brand to speed idea-to-product. Strategically, it avoided the milk-coffee battlefield dominated by Luckin/Cotti and differentiated with fruit coffee, filling a value gap and drawing strong consumer interest.

2) On franchising, Mixue stepped up Lucky Cup support in H2, shifting from broad-based subsidies to targeted incentives, covering both new and existing franchisees and key Tier-1/priority regions.

Valuation: after the prior pullback, and factoring likely negative SSS in 2026 as subsidies fade, Dolphin Research cut its model. Assuming 2026 profit growth of 13% and net profit of RMB 6.7bn, the stock implies ~17x. Versus an estimated 3-yr EPS CAGR of 15%, this still looks rich. To preserve a margin of safety, Dolphin Research suggests waiting for <15x, or ~HKD 114.2bn mkt cap, before adding.

Detailed earnings read-through below:

I. Revenue slightly beat the street

In H2 2025, Mixue delivered revenue of RMB 18.7bn (+32% YoY). While softer delivery subsidies trimmed SSS, rapid footprint expansion sustained healthy overall growth, with a mild HoH decel vs. H1 (+39%).

By mix, franchise-related services declined by 40bps to 2.2%; Dolphin Research believes higher subsidies in H2 to attract Lucky Cup franchisees were the main reason.

II. Lucky Cup fueled a store-opening blitz

Domestically, net adds were 7,075 in H2, accelerating vs. H1. Post strategy reset, Lucky Cup expanded at 'lightning speed', contributing at least 4,000 net adds per channel checks. By region, incremental stores were concentrated in lower-tier markets.

For the core brand, and per prior analysis, Dolphin Research estimates ~3,000 new stores in H2 (+20% YoY), clearly slower than prior years. As discussed in Mixue Ice City: Lucky Cup’s 'unlucky' turn — is Mixue betting on the fields?, the high-tier city expansion dividend is fading, shifting the battlefield to lower-tier markets, so a slowdown for the core brand was expected.

Also noteworthy, in Oct, Mixue spent nearly RMB 300mn to acquire 53% of Fulu Jia, marking its entry into fresh beer; by year-end, Fresh Beer Fulu Jia had ~1,800 stores.

The strategic intent is to build a 24-hour loop: morning coffee (Lucky Cup) – afternoon tea (Mixue Ice City) – evening beer (Fresh Beer Fulu Jia), extending scenarios and broadening the customer base.

However, fresh beer contains active yeast and is sensitive to temperature, time, and environment, making its supply chain hard to port from tea/coffee. Heavy reinvestment in cold-chain and production will be required. The vision is attractive, but Dolphin Research stays cautious and will track execution.

Overseas stores fell by 266 vs. H1; Dolphin Research believes Mixue continued to streamline overlapping, underperforming, and less compliant sites in SE Asia (Indonesia, Vietnam).

In addition, in Dec, Mixue officially entered N. America with simultaneous openings in Los Angeles and New York.

III. Cup volume drove SSS growth

The company did not disclose store-level KPIs. Based on channel checks and lower delivery subsidies in H2, Dolphin Research sees low single-digit SSS growth, led by cup volume, with per-cup ASP flat to slightly down.

IV. GPM kept falling

On raw materials, key lemon regions in Anyue (Sichuan) and Yunnan suffered late-spring cold snaps, frosts, and summer droughts, slashing fruit set and cutting national output by 30%–50% YoY. Major global producers (U.S., S. Africa, Turkey, etc.) were also hit, widening the global supply gap and pushing domestic prices higher; Anyue farm-gate lemon prices roughly doubled vs. 2024.

On channel mix, the rising share of delivery orders, which carry lower margins, also pressured group GPM. GPM fell ~220bps to 30.7%.

V. Profit slightly missed expectations

On selling, a mature 'Snow King' IP and low-cost social traffic displaced traditional ads, bringing the selling ratio down 70bps to 6%. Admin expenses were temporarily elevated by one-off integration costs from the Oct acquisition of 'Fresh Beer Fulu Jia'. Net profit was RMB 3.21bn (+25% YoY), slightly below market expectations.

Longbridge Dolphin Research on 'Mixue Ice City':

Deep dives

Jun 11, 2025: Mixue Ice City: a 'doubling' story not yet sweet abroad, nor easy to own

Jun 10, 2025: Mixue Ice City: Lucky Cup’s 'unlucky' turn — is Mixue betting on the fields?

Mar 13, 2025: 'PDD of on-premise drinks' Mixue Ice City: what powers the 'Snow King'?

Commentary

Aug 28, 2025: Mixue: lower-tier blitz, Lucky Cup’s comeback, and why the premium may be justified