Where do we get a cone of ice cream for RM 2?
Once, it used to be at McDonald’s.
But in recent years, it is at Mixue.
In addition to ice cream, Mixue today offers a wide selection of iced fruit tea and iced milk tea for prices below RM 10. While many peers focus on premium, Mixue chooses to be more affordable and accessible to common men on the street. Since its founding in 1997, Mixue is now available across 46,479 stores, mainly located in cities, counties and towns across Mainland China and in cities across Southeast Asia as of 31 December 2024.
On 3 March 2025, Mixue was successfully listed on the Hong Kong Stock Exchange (HKSE). As I write, on 7 March 2025, Mixue has a market capitalisation of HK$ 52.7 billion. Personally, I had read through its IPO Prospectus to find out the details of its business model. Here, I would make a list of 8 things that you need to know about Mixue before you invest:
1. Revenue Model
More than 99% of Mixue’s stores are franchised to 19,780 franchisees on 30 September 2024. It is a significant growth from 6,366 franchisees on 1 January 2021. Mixue had generated >90% of its revenues from selling store supplies (goods) to its franchisees. These include ingredients like syrups, milk, tea, coffee, fruit, grains, condiments and packaging materials. The balance of sales (<10%) were generated from equipment sales, franchise fees, management fees, and as well as training fees to franchisees.
2. Supply Chain
Mixue operates a massive global supply chain that ensures both quality and cost efficiency. This includes an extensive global procurement network, production bases and logistic systems which could support its rapidly growing stores across Mainland China and Southeast Asia.
In terms of global procurement network, Mixue is able to procure materials at scale and at below average prices as compared to its peers. For instance, Mixue procured milk powder and lemons of the same type and quality at prices below 10% and 20% than its peers in 2023.
In terms of production, Mixue operates five production bases with a production capacity of about 1.65 million tons annually. Situated in Henan, Hainan, Guangxi, Chongqing, and Anhui, they had been equipped with 60+ intelligent production lines with advanced automation equipment and as well as digital tools that produce cost-effective food ingredients and packaging materials that are supplied to its franchisees.
In terms of logistics, Mixue operates 27 warehouses and a wide delivery network which covers a total of 40,000+ stores in 300+ cities, 1,700 counties, and 4,900 towns in Mainland China. Mixue leverages digital tools to synchronise the flow of goods, information, funds, and logistics that are able to deliver goods at above average delivery time.
The cost efficiencies achieved in all stages in its supply chain could translate to better pricing for all its beverages.
Thus, Mixue enhances its competitive edge via expanding its economies of scale in all its supply chain.
3. Brand
Mixue owns the “Mixue” brand which has gathered around 47 million followers across key social platforms such as Weixin, Douyin, Kuaishou, rednote, Weibo and BiliBili. In 2018, Mixue created “Snow King”, a cartoon-character holding an ice-cream scepter which will act as Mixue’s lifelong ambassador. It engages audiences through its theme song, short videos, music festivals, and as well as animated TV series, costumed characters and featured merchandise. To-date, the Snow King theme song had garnered 9.7 billion views across social platforms and the animated series “The Legend of Snow King” had amassed over 220 million views since debuting in August 2023.
4. Profitability
In line with its growing retail network, Mixue had increased its revenues from RMB 10.4 billion in 2021 to RMB 20.3 billion in 2023. Its gross profit margins were maintained at around 30% in that three-year period. Thus, it brought in higher gross profits from RMB 3.2 billion in 2021 to as high as RMB 6.0 billion in 2023. In that period, Mixue had increased its headcount and thus, incurring greater selling and distribution expenses. This led to a slight fall in net profit margins from 18.5% in 2021 to 15.7% in 2023. Profits attributed to shareholders increased from RMB 1.9 billion to as much as RMB 3.1 billion in 2023. In 2024, Mixue gave a profit estimate of not less than RMB 4.4 billion or approximately HK$ 4.8 billion.
5. Future Plans
Based on its offer price of HK$ 202.50 for its IPO shares, Mixue intends to raise HK$ 3.29 billion in gross proceeds.
They would be used in the following manner:
45% of the proceeds would be used to expand its production capacity in China. This includes its construction of new facilities in its Hainan production base, which produces frozen fruit products, coffee products, syrups, and condiments in 2023-2025 and Mixue’s planned construction of new facilities at its Henan production base that produces ice cream powder and milk powder. Such is to be constructed over phases over the next 2-4 years, growing 80,000 tons of yearly production capacity from its existing 1.21 million tons presently.
9% of the proceeds will be used to improve on its logistic systems in China. It includes enlarging storage capacity, geographical coverage, and improving delivery efficiency.
12% of the proceeds shall be used to establish its international supply chain platform. Presently, Mixue has around 5,000 stores located mainly in Indonesia, Vietnam, Malaysia and Thailand. As such, Mixue plans to set up a multi-functional supply chain centre in Southeast Asia which could allow ingredients to be supplied to franchisees in Southeast Asia directly, rather than shipping its supplies from its production bases in China.
12% of the proceeds is allocated for branding and intellectual property (IP) building purposes. At present, it includes expansion of Snow King’s content matrix and omni-channel marketing efforts to extend its brand influences.
10% of the proceeds shall be reserved for general working purposes.
6. Major Shareholders
Zhang Hongchao and his brother, Zhang Hongfu shall remain the largest shareholders of Mixue, directly and indirectly holding 41.7% shares via Qingchun Wuwei and Shiyu Zuxia.
Zhang Hongchao is the Chairman and Executive Director of Mixue. He is responsible of Mixue’s corporate strategies and culture. Zhang Hongfu is the Executive Director and CEO of Mixue. For him, he shall be in charge of operations and management of Mixue. Shi Peng, their cousin, is a minor shareholder of Mixue. He is in charge of operations in China.
7. Dividend Policy
Mixue does not adopt a formal dividend policy at present.
8. Valuation
Based on its profit estimate of HK$ 4.8 billion in 2024, Mixue’s earnings per share (EPS) can be estimated to be around HK$ 12.73, which could then be used to estimate its P/E Ratio presently.
Conclusion:
Mixue has been focusing on scale and supply chain. This enabled it to build economies of scale, which can be difficult for competitors to replicate and so, forming a high barrier of entry. The cost efficiencies had been passed to its franchisees and thus, enabling better pricing power for all the beverage products offered in its huge retail network of 46,479 stores presently. All in all, Mixue’s profitability increased from RMB 1.9 billion in 2021 to an estimated RMB 4.4 billion in 2024 or as much as HK$ 4.8 billion. Moving forward, Mixue has allocated IPO proceeds to expand its reach in both Mainland China and Southeast Asia. As investors, the main question lies in its valuations and also if Mixue meets your investment criteria.
Here, if you intend to build a Growth-based Portfolio filled with the top 1% companies listed in the United States, check out our free 1-Hour online webinar training on growth investing:
Link:
Online Training: Case Study of 1 Actual Stock that I had Invested in and Why It Doesn’t Take High Risk to Generate High Returns in the Stock Market?
