NEWS WRAP: Green Tea Group slumps on Hong Kong trading debut

The restaurant operator’s shares fell 5.6% in their first half-day of trade, as investors worried about weak consumer sentiment in China

By Doug Young

Shares of restaurant operator Green Tea Group Ltd. (6831.HK) slumped in their Hong Kong trading debut on Friday, as the broader market sagged and investors worried about weak consumer sentiment in China.

Green Tea Group said it raised net proceeds of HK$746 million ($95 million) after selling 168 million shares priced at HK$7.19 each. The stock fell steadily during the Friday morning trading session, and was down about 5.6% at HK$6.79 at the midday break, giving the company a market value of about HK$4.5 billion.

The Hong Kong portion of the listing for local investors was more than 300 times oversubscribed, while the international portion was 6.2 times oversubscribed, indicating strong demand for the shares.

Starting with a single restaurant in the scenic Eastern Chinese city of Hangzhou, Green Tea Group has grown to currently operate a chain of 493 restaurants nationwide serving fusion-style Chinese cuisine. The company’s restaurant count grew by an average of 30% annually over each of the last two years. It expects to continue that expansion by opening another 150 outlets this year and 200 in 2026.

Like many mid-scale restaurant operators in China, Green Tea Group has had to contend with weakening demand as consumers become more cautious during China’s economic slowdown.

The company’s revenue grew about 7% to 3.84 billion yuan last year from 3.59 billion yuan in 2023, though its restaurant count grew by a much faster 29% over the year to reach 465 by the end of last December. Last year’s revenue growth rate also represented a sharp slowdown from the 51% growth that Green Tea recorded in 2023.

As consumers have become more cautious, their average spending has also declined. Green Tea Group reported its average customer spent 56.2 yuan last year, down from 61.8 yuan in 2023 and 62.9 yuan in 2022. The company’s average table turnover rate also slumped to 3.0 times per day last year from 3.3 in 2023, while its same-store sales growth last year fell 10.3%.

“In 2024, our restaurant performance declined in general as compared to that in 2023, primarily due to a general change in consumer behavior to reduce expenses and frequencies of dining out given the current economic environment,” the company said.

Despite the difficult operating environment, the company reported its profit rose 9.1% year-on-year last year to 350 million yuan. Following its trading debut, Green Tea Group’s stock currently trades at a price-to-earnings (P/E) ratio of about 12, trailing the 17 for leading hotpot chain Haidilao (6862.HK) and 14 for recently listed Xiaocaiyuan (0999.HK). Yum China (YUMC.US; 9987.HK), operator of KFC and Pizza Hut restaurants in China, also trades at a higher P/E of 19, reflecting a “consumption downgrade” as consumers gravitate towards more affordable dining options.

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