Macquarie initiates coverage on Mixue stock with Underperform rating

Macquarie initiated coverage on Mixue Group (HK:2097) with an Underperform rating and a HK$279.00 price target, citing increasing market saturation within China's lower-tier cities. The firm anticipates more moderate store network growth as Mixue shifts to efficiency over scale, while also warning of accelerating competitor penetration and the potential negative impact from the eventual phase-out of food delivery subsidies, which could lead to muted sales growth by 2026.

Analysis

Macquarie has initiated coverage on Mixue Group (HK:2097) with an Underperform rating and a price target of HK$279.00, signaling significant headwinds for the beverage giant. Despite its dominant scale with over 53,000 stores, the analysis points to increasing market saturation in its core Chinese market, where over 91% of its stores are located and more than 57% are in lower-tier cities. In response, Mixue is reportedly shifting its strategy from aggressive scale expansion to enhancing store efficiency, a move Macquarie expects will lead to more moderate network growth. The negative outlook is further compounded by two forward-looking risks: an anticipated acceleration of competitor penetration into lower-tier cities in the first half of 2025, and the potential for a significant negative impact on same-store sales growth from the eventual phase-out of food delivery subsidies. These factors underpin the forecast for muted sales growth in 2026, presenting a challenging outlook for the company.

Key Decisions for Investors

• Given the 'Underperform' rating and concerns over market saturation, investors should treat Mixue Group with caution and recognize the potential for decelerating growth.
• Monitor competitive activity in China's lower-tier cities and any changes to food delivery subsidy policies, as these are identified as key catalysts that could negatively impact same-store sales and validate the bearish thesis.
• Investors should pay close attention to company reports on store efficiency metrics versus network expansion, as this strategic shift will be a crucial indicator of future performance and growth trajectory.