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00:00We're going to talk more about Chargy now. It's a premium tea brand that takes its inspiration from the international coffee chains.
00:07It was founded by Zhang Junjie in Yunnan in 2017. Since then, it's grown enormously, with more than 6,000 stores by the end of last year, an 83% increase on the previous year.
00:19Most of those stores are in China, but more than 150 are overseas.
00:23The company plans to open as many as 1,500 new stores this year in China and globally.
00:28Chargy is one of a number of tea brands in China, all targeting different markets.
00:34The Mishui Group is the top performer, with revenue of more than $3 billion last year.
00:39That's twice as much as Chargy, and 2.8 times more than Gu Ming.
00:44Now, Chargy has become the fastest-growing player, with net profits nearly tripling to more than $1.7 billion last year.
00:53Zhang Jiuwei is the president and chief economist at Pinpoint Asset Management.
00:57This particular subsector that Chargy is in, this new beverage subsector, I think has been doing quite well in China over the past, say, five years.
01:09And investors have very strong confidence in this subsector to continue to perform very well.
01:14And so that's the confidence in that particular subsector that's reflected in the stock price.
01:20And other than that, I think part of the reason why it's doing well is because, you know, this uncertainty related to the trade war that created sort of investors are getting cautious about stocks with a lot of external exposure, right, with trade exposure.
01:40So that investors are shifting towards more domestic-driven, say, consumption names, so that this particular subsector also benefit from.
01:50Well, bearing in mind that uncertainty, and given these trade tensions between the United States and China,
01:55why do you think that Chargy chose to list on the NASDAQ, then, not the Hong Kong exchange?
02:00Yeah, it's an interesting choice.
02:04I think this IPO process usually takes a long time.
02:07So the decision must have been made quite some time ago before the trade war became it is today.
02:13I think the decision to be listed in New York rather than Hong Kong probably reflects the management's ambition to become a global brand, to go beyond Asia.
02:25I understand the company already had, you know, established shops in the region, in Southeast Asia, for instance.
02:33They probably have ambition to go, say, to the U.S., to Europe, and become a really global brand, compete with, you know, other global companies like Starbucks.
02:44The company has grown rapidly, hasn't it, since it was founded in 2017.
02:48What do you think has driven that success, and can the model translate well to the West?
02:53Yeah, it's an interesting story.
02:55If you look at the subsector, I mean, there are actually quite a lot of companies like Chargy competing in China over the, you know, quite many years.
03:04And I think what this particular company managed to succeed is that they really simplify their business model, right?
03:13So that they, you know, a lot of their competitors, you know, could come up with dozens of, you know, different teas that make it very difficult to replicate, you know, build more shops across the cities,
03:28because it's just so difficult to manage these so many different product lines, whereas this particular company only focuses on a small number of tea products.
03:40We've seen fewer Chinese companies listing in the U.S. over the past year.
03:45Does Chargy's IPO signal a renewed interest in U.S. capital markets, or is it more of an exception rather than a trend?
03:53I think there's always interest among the Chinese, you know, those top companies.
03:58They all have ambition to become, you know, global brands, and certainly to be listed in New York, help you to build your brand and, you know, increase the value of your brand.
04:09And so there's definitely interest among the Chinese companies.
04:13But I think timing is one issue that now, with the trade war ongoing, that some of the companies may have concerns whether this is the best timing to go.
04:26But definitely, I think a lot of the companies I know have the ambition and have the interest to be listed in New York.
04:34So, let's see.
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