--- title: "Gu Ming: Subsidies fade, coffee picks up; the 'Costco of tea' stays solid!" type: "Topics" locale: "en" url: "https://longbridge.com/en/dolphin/post/43611328.md" description: "Guming delivered solid 1H results, maintaining cup volume even as delivery subsidies faded sharply.Core OPM reached a new high." datetime: "2026-08-26T16:12:21.000Z" locales: - [en](https://longbridge.com/en/dolphin/post/43611328.md) - [zh-CN](https://longbridge.com/zh-CN/dolphin/post/43611328.md) - [zh-HK](https://longbridge.com/zh-HK/dolphin/post/43611328.md) author: "[Dolphin Research](https://longbridge.com/en/dolphin.md)" generator: "portal-rs" --- # Gu Ming: Subsidies fade, coffee picks up; the 'Costco of tea' stays solid! On the evening of Aug 26 (Beijing time), Gu Ming (1364.HK) released its 2026 H1 results. Overall performance was solid: despite a sharp pullback in delivery subsidies, it held cup volume and set a new high in core OP margin. $GUMING(01364.HK) **Key takeaways:** **1) Growth moderated QoQ off a high base but remained resilient.** H1 revenue reached RMB 7.47bn (+32% YoY). Growth was almost entirely store-led, with per-store metrics roughly flat despite last year's elevated delivery-subsidy base, pointing to high-quality growth. **2) Tighter screening of new franchisees; opening pace slowed materially.** Gu Ming opened 1,318 stores and closed 521 in H1, for net adds of 797, down 37% YoY. By franchisee mix, new franchisees fell 40% YoY while exits were roughly flat; back-solving implies the share of new stores opened by existing franchisees jumped from 14.8% to 39%. This aligns with management's rationale: prioritizing upgrades to Gen-6 stores and enforcing stricter site-selection for new openings. **3) Cup volume held firm despite subsidy fade.** Average daily cups per store were 440, roughly flat YoY, while ASP per cup rose 3.1% to RMB 17.8. Incremental coffee and breakfast sales effectively offset the drag from lower delivery subsidies. **4) Operating leverage kicked in; profitability improved.** GPM expanded 190bps to 33.4% as reduced discounts on raw-material sales to franchisees and supply-chain efficiencies lowered costs, in line with prior guidance. With opex ratios down across the board, core OP margin reached a record 27%. **5) Financial snapshot:** **Dolphin Research view:** **Overall, this print shows Gu Ming has successfully shifted growth engines—from 'delivery subsidies + land grab' to 'category expansion + densification'—without a stall at the store level.** Over the past year, growth was driven largely by platform subsidies and 1–2k store additions every half. In H1, both engines slowed (subsidies faded; openings cut to < two-thirds of last year), yet revenue still grew 30%+, suggesting the second curve—coffee + breakfast—is working well. Some in the market read the lowered store-opening guide as 'the growth story is over', triggering a sharp selloff, which we see as misguided. Context: among 112 chain tea-drink brands in H1, 62% saw store counts shrink or stall. In a shakeout, being able to choose to open fewer stores is a capability, as most brands want to open but cannot; Gu Ming's choice to slow near term, upgrade quality, and protect franchisee profitability is consistent with its long-standing playbook. On valuation, assuming full-year NP of ~RMB 3.1bn (H2 roughly in line with H1), the stock trades at ~17x after the recent rebound. Against our est. 18%+ EPS CAGR over the next three years, this is not demanding. With the mid-to-long-term thesis intact, a base-case re-rate to 18x implies ~8–10% upside. **Detailed takeaways:** **I. Overall performance: growth slowed QoQ but remained high quality** H1 revenue reached RMB 7.47bn (+32% YoY). Growth was almost entirely store-led, with per-store metrics roughly flat despite last year's elevated delivery-subsidy base, indicating healthy quality. **II. Store openings: net adds of 797; deliberate slowdown** Management cited three reasons for the slower pace: greater focus on store quality, prioritizing upgrades to Gen-6 stores, and tighter site-selection for new stores. This is consistent with the franchisee mix shift toward existing operators. The only blemish was closures: we estimate the closure rate rose from 3.1% to 3.84%. We view this as normal cleanup during an industry shakeout, but it warrants another 1–2 quarters of monitoring. By geography, lower-tier cities (Tier-2 and below) accounted for 82% of stores (81% last year), with township stores rising from 43% to 45%. Tier-1 cities had only 459 stores (3%), reflecting management's view that delivery mix and labor/rent are high while pricing is constrained, dampening franchisee margins. **III. 'Pick-and-shovel' biz. mix increased** By revenue breakdown, sales of goods and equipment were RMB 5.97bn (+32.8% YoY), lifting the mix by 50bps to 79.9%. This is compatible with higher GPM and is core to the model: cost-down outpacing givebacks, lowering franchisees' input costs while lifting the company's GPM, a win-win. The backbone is infrastructure: 24 warehouses by end-Jun with ~277k sqm of GFA and >82k cbm of cold storage; ~73% of stores lie within 150km of a warehouse, ~99% achieve cold-chain delivery every other day, and DC-to-store delivery costs are under 1% of GMV. **IV. Per-store cup volume held on a high base** GMV was RMB 19.75bn (+40.1% YoY) with 1.11bn cups sold (+35.9% YoY). Holding 440 cups per store per day on last year's subsidy-inflated base suggests some users acquired during the subsidy phase were retained. Management's comment is consistent: stability was supported by richer coffee offerings and expansion into breakfast, partially offset by lower delivery-platform subsidies. Despite a lower delivery mix (reducing the delivery-fee component), ASP per cup still rose 3.1%. We attribute this mainly to product mix (coffee, breakfast bakery, larger sizes) and deliberate pricing on delivery—management previously noted delivery prices are set RMB 3–4 higher than dine-in. **V. Operating leverage release; profitability up** GPM expanded 190bps to 33.4% as reduced givebacks on raw-material sales to franchisees and supply-chain efficiency gains lowered costs, in line with guidance. With selling, admin, and other opex ratios all down, core OP margin hit a record 27%. **Longbridge Dolphin Research on 'Gu Ming' (history):** **Deep Dives** Jul 4, 2025: '[Gu Ming: Slow Is Fast! A 'Costco' in Tea Drinks?](https://longportapp.cn/en/topics/31493827?channel=t31493827&invite-code=7XHHT4&app_id=longbridge&utm_source=longbridge_app_share&locale=zh-CN)' Jul 8, 2025: '[**Gu Ming: Offense and Defense — Can the 'Costco of Tea Drinks' Win Out?**](https://longportapp.cn/en/topics/31572004?channel=t31572004&invite-code=7XHHT4&app_id=longbridge&utm_source=longbridge_app_share&locale=zh-CN)**'** **Commentary** Aug 27, 2025: '[**Gu Ming: Delivery in One Hand, Coffee in the Other — Laughing Again?**](https://longbridge.cn/en/topics/33382490?channel=SH000001&invite-code=7XHHT4&app_id=longbridge&utm_source=longbridge_app_share&locale=zh-CN&share_track_id=b671ab96-70ef-4c99-94ba-7c2f8f6ce496)**'** Risk disclosure and statement: [Dolphin Research Disclaimer and General Disclosures](https://support.longbridge.global/topics/misc/dolphin-disclaimer) ### Related Stocks - [01364.HK](https://longbridge.com/en/quote/01364.HK.md) - [02555.HK](https://longbridge.com/en/quote/02555.HK.md) --- > **Disclaimer: This article is for reference only and does not constitute any investment advice.**