Once the first new-style tea drink company to go public, CHABAIDAO has now been listed for a year and a half, reported a mid-year result showing revenue growth without profit growth, and lost 1,218 franchisees in a single year. On 13 October, CHABAIDAO (02555) was brought to a halt.

At 9:00 a.m. on 13 October, the Hong Kong Stock Exchange, acting on instructions from the Hong Kong Securities and Futures Commission, suspended trading in CHABAIDAO shares pursuant to Section 8(1) of the Securities and Futures (Stock Market Listing) Rules. The SFC said it had taken action against two groups suspected of participating in fraudulent schemes intended to create a false or misleading appearance of demand for shares in initial public offerings. On the last trading day before the suspension, 12 October, CHABAIDAO closed at HK$4.035 per share, giving it a total market value of approximately HK$5.96 billion. That price is more than 70% below its IPO price of HK$17.5 per share in April 2024. It closed at HK$12.8 per share on its first day of listing, and the share price has continued to weaken since then, falling more than 36% year-to-date. Before the suspension, CHABAIDAO had announced plans to hold an extraordinary general meeting on 30 October to consider an H-share incentive plan and a motion to distribute an interim dividend of RMB0.15 per share. The suspension has interrupted the progress of these agenda items.

Reason for the suspension

On the day of the suspension, the SFC formally published further details. The SFC said it had taken action against two groups suspected of participating in fraudulent schemes intended to create a false or misleading appearance of demand for shares in initial public offerings. The SFC is highly concerned that CHABAIDAO's IPO may have been artificially manipulated to create a false appearance of demand for its shares. While the SFC continues its investigation, suspending trading in CHABAIDAO shares is necessary or appropriate to maintain an orderly and fair market for the stock and to protect the interests of the investing public. Regarding the first suspect group, the SFC has issued restriction notices to six brokerage firms, prohibiting them from disposing of or dealing with assets in client accounts held in the names of Sun Ran (female) and eight related companies, up to a limit of HK$4.379 billion — the highest restriction amount in the SFC's history for a case of this kind. The first suspect group is suspected of participating in fraudulent schemes relating to the initial public offerings of Cloudbreak Pharma and CHABAIDAO. Regarding the second suspect group, the SFC has issued restriction notices to 29 brokerage firms, prohibiting them from dealing with or disposing of assets in client accounts held in the names of Liu Haoran (male), The Reynold Lemkins Group (Asia) Limited and Kaufmann & Company Pan-Asia Limited, up to a limit of HK$285 million. This suspect group is suspected of participating in fraudulent schemes relating to the initial public offering of Tianju Dihe (Suzhou) Technology Co., Ltd. The SFC also noted that the suspect groups are suspected of participating in fraudulent schemes in which some IPO proceeds may have been transferred away from the relevant companies under undisclosed agreements between the listed companies and the groups, purportedly for investment in financial products, and that such agreements may have facilitated the secret return of IPO proceeds to major IPO placees or their connected persons. SFC Chief Executive Officer Julia Leung said: "Market integrity and stability are the cornerstone of maintaining a fair capital market and the confidence of genuine investors. We have a zero-tolerance policy towards any form of IPO manipulation, price manipulation or creation of a false market." The SFC also stressed that the brokerage firms that received restriction notices are not the subjects of the SFC's investigation, and that the restriction notices do not affect the operations of those brokerage firms or their other clients. The parties involved may later be ordered through restitution proceedings to compensate affected investors. As of now, CHABAIDAO has not made any public response regarding the SFC investigation, the specific reasons for the suspension, or subsequent resumption arrangements. The company's announcements have also not stated a timetable for resuming trading. Because the suspension occurred just before the interim dividend distribution and the review of the equity incentive plan, the uncertainty over the resumption timetable adds another layer of variables to an already sluggish share price.

Franchisees cannot be retained

CHABAIDAO's 2026 interim report showed that growth had almost stopped. Revenue was RMB2.655 billion, up 6.2% year-on-year; net profit attributable to shareholders was RMB336 million, up 3.2% year-on-year. Profit growth was even lower than revenue growth — revenue rose but profit did not. Costs had already been squeezed: distribution and selling expenses fell 7.9% year-on-year, administrative expenses fell 4.2% year-on-year, and both the selling expense ratio and administrative expense ratio were declining. Cost control did not falter, yet profit still could not rise. The problem is not on the cost side. The problem lies in individual stores and franchisees. First, franchisees. In the first half of 2026, the number of franchisees increased from 5,923 to 6,038, a net increase of 115. During the period, 612 were added and 497 were terminated. Of the 497 franchisees whose cooperation was terminated, only 12 were actively terminated by the company; the rest left on their own. For the full year 2025, the number of terminated franchisees reached 1,218, a churn rate of 17.06%, the highest in the industry. Franchisees are leaving, and most are not being removed — they are withdrawing voluntarily. Rising willingness among franchisees to exit directly affects store expansion speed and new franchise recruitment. Store expansion is slowing. Domestic stores increased by only 170 net in the first half of the year, while global net additions were 398. Now looking at individual stores, Guotai Haitong Securities estimates that average sales of goods per store in the first half of 2026 were about -5.5% year-on-year. Converted to per-store revenue, that was RMB299,500, up only 1.44% year-on-year. The 6.2% revenue growth came almost entirely from store count expansion, not from stores selling more. Individual stores are not growing, stores are not opening quickly, and both legs of the revenue side are stuck. Breaking down the revenue structure makes the problem clearer. CHABAIDAO's revenue from selling goods to franchisees was RMB2.257 billion, down 2.3% year-on-year. This is CHABAIDAO's largest source of revenue, accounting for about 85%, and franchisees are purchasing fewer raw materials and packaging materials from headquarters. Revenue from royalty fees and franchise fees was RMB81 million, down 19.5% year-on-year, as new franchise recruitment and renewals also contracted. Both of these are recurring operating revenue items, and both fell, indicating that real sell-through at franchisees is weakening. And this portion of revenue is precisely the part that contributes more stable profit. What held total revenue in positive growth was equipment sales. In the first half, equipment sales revenue was RMB267 million, up 450.3% year-on-year, mainly from selling fully automatic coffee machines to franchisees. This is a one-time transaction — each machine sold counts once — and it has little to do with the continued operating condition of franchisees, while its profit contribution is also limited. Equipment can be sold once, but goods must be sold continuously; the latter is the reflection of franchisees' real sell-through. Growth supported by one-time equipment revenue does not have a solid foundation, and it also does not explain why profit growth is lower than revenue growth. Low profit growth is also related to investment in the second growth curve. Coffee drinks and overseas markets are the second curve CHABAIDAO is betting on. The coffee beverage business is giving up margin to franchisees, dragging down gross margin; although the overseas business is already profitable in markets such as South Korea, its overall scale is too small to fill the gap in main business same-store growth in the short term. After the interim report, brokerages' disagreements also centered on these two points: the persistence of same-store revenue decline, and how long it will take for coffee and overseas investment to translate into profit. The target prices given by three brokerages range from HK$5.80 to HK$8.92, a wide spread: CICC cut the most, from HK$9.30 at the start of the year to HK$5.80; Huatai cut from HK$7.75 to HK$7.45, a relatively moderate reduction; Guotai Haitong gave the highest at HK$8.92 and forecast adjusted net profit for 2026 to 2028 of RMB872 million, RMB952 million and RMB1.033 billion, respectively. Ultimately, both of these issues come back to franchisees and the single-store model.

New-style tea drinks enter stock competition

The difficulties facing CHABAIDAO are not isolated when viewed across the entire new-style tea drink industry. According to data from the Red Meal Industry Research Institute, the national freshly made tea drink market reached RMB195.7 billion in 2025, up about 11.4% year-on-year, and is expected to reach RMB210 billion in 2026, but growth will further decline to 7.3%. As of June 2026, there were about 452,000 tea drink stores nationwide, and the total number of stores has still not effectively broken through the ceiling of 460,000. The industry has shifted from an incremental market to stock competition; after store openings and closures offset each other, scale no longer grows. In the first half of 2026, six listed new-style tea drink companies had combined revenue of RMB36.78 billion, up 9.0% year-on-year; combined net profit attributable to shareholders was RMB5.34 billion, down 2% year-on-year. Revenue rose while profit fell. For many years previously, the norm in this industry was revenue growth of more than 20%, but it has now fallen to single digits, and profit has turned negative. CHABAIDAO is not the only one under pressure. First look at a table: Note: Guming's 44.4% is the year-on-year growth rate of adjusted net profit; under accounting standards, profit for the period was -3.6% year-on-year. Among store-related indicators, CHABAIDAO's figure is converted per-store revenue, Mixue Ice City's is average headquarters revenue per store, and Guming's is average daily GMV per store. The calibers differ, and the data comes from public media, earnings briefings and brokerage research reports, not originally disclosed fields in financial statements. In terms of scale, CHABAIDAO ranked fourth with revenue of RMB2.655 billion; its revenue growth of 6.2% was lower than that of Shanghai Auntie and Guming, and its profit growth of 3.2% also lagged behind. It ranks in the middle by scale but lags in growth. Among the six, there are no winners. Shanghai Auntie traded store closure rate for expansion speed, Guming's profit growth depended on a change in accounting caliber, Mixue Ice City recorded negative profit growth in a half-year report for the first time after listing, Chagee protected profit but could not protect same-store performance, and Nayuki was still contracting amid losses. CHABAIDAO's problem is that it is simultaneously bearing the industry's common pressures while also exposing its own weak links in revenue structure and franchisee retention. In horizontal comparison, CHABAIDAO's global net increase was 398 stores, lower than Mixue's 4,166, Shanghai Auntie's 1,697 and Guming's 797; converted per-store revenue was RMB299,500, up only 1.44% year-on-year, lower than Guming's 2.6% same-store growth. Beyond the common growth pressure faced by all six, CHABAIDAO also has an additional problem of franchisee attrition; it has neither Guming's ability to improve same-store performance nor Shanghai Auntie's expansion speed. A CICC research report argues that as industry growth normalizes and leading companies strengthen their fundamentals, the industry is gradually evolving from a hundred flowers blooming to head concentration and a more stable landscape, and concentration is expected to continue rising in the future. For CHABAIDAO, this means it must compete with brands still expanding, such as Mixue, Guming and Shanghai Auntie, for the same group of franchisees. Back to CHABAIDAO itself. The problems in the interim report are already there, and the suspension has added another layer of uncertainty to these problems. Coffee and overseas markets are still in the investment phase and cannot support growth in the short term. The regulatory investigation matters have not yet been made public, and the answer can only wait for official announcements. Disclaimer: The above verification only addresses public facts cited in the text and does not represent a judgment on CHABAIDAO's investment value. The information is for reference only and does not constitute investment advice.