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Should You Add Nayuki Holdings Limited (2150.HK) In Your Portfolio?

Nayuki Holdings Limited (2150.HK) closed its IPO on 23 June 2021 with 204.8 times over subscription. According to ETNet, total margin application was over HKD 104.8 billion. Nayuki Holdings Limited will start its trading in Hong Kong Stock Exchange on 30 June 2021. Should investors add it to their portfolio?

What is Nayuki?

Nayuki Holdings Limited operate Nayuki teahouses, a leading premium modern tea house chain in China serving freshly-made tea drinks. According to its IPO prospectus, Nayuki was the second largest teahouse brand in terms of total retail consumption value among China’s premium modern tea house market in 2020, with a market share of 18.9%, and was the seventh largest teahouse brand in terms of total retail consumption value among China’s overall freshly-made tea shop industry in 2020, with a market share of 3.9%.

Operation Highlights

Nayuki teahouse network has experienced a rapid expansion,with the number of Nayuki teahouses growing from 44 as of December 31, 2017 to 491 as of December 31, 2020, which covering 66 cities across mainland China. Nayuki membership program and Nayuki app were introduced, which are fully integrated with Nayuki teahouse network. Currently, approximately 35.3 million members registered with Nayuki membership program. In 2020, approximately 49.0% of the total number of orders was contributed by Nayuki members.

Financial Highlights

Revenues increase from RMB 1,086.82 million in 2018 to RMB 3,057.18 million in 2020. Loss for the year increased from RMB 69.7 million to RMB 203.3 million in 2020. The increase in net loss in 2020 was attributable to the recognition of fair value changes of financial liabilities at fair value.

Average daily sales per teahouse (RMB in thousands) decreased from 30.7 in 2018 to 20.2 in 2020. Average orders per teahouse per day decreased from 716 in 2018 to 470 in 2020. Average sales value per order remained stable from RMB 42.9 in 2018 to RMB 43 in 2020.

Same store sales (RMB in million) decreased from 1,666.3 in 2019 to 1,308.5 in 2020. Same store profit (RMB in millions) decreased 349.7 in 2019 to 176.8 in 2020.

Conclusion

As shown by the average daily and same store data, demand for Nayuki’s tea drinks seems decreasing. The strong revenue growth for Nayuki Holdings Limited is driven by the expansion of its store. However, as competition in freshly-made tea drinks market are high and barrier to entry is extremely low, growth and profitability still be doubtful in long run.

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