Mixue Group's fundamentals may not be able to support the existing valuation, Bank of America downgraded its rating to underperform the market

On June 9, Bank of America published a research report stating that Mixue Group (2097.HK) fundamentals may not be able to support its existing valuation and will lower the rating from neutral to underperforming the market.

Research report analyzed that Mixue Group hit a new high recently, with its stock price rising by about 1.8 times since its listing in early March. The current price level corresponds to the forecast price-to-earnings ratio for this and next two years. Bank of America pointed out that although Mixue is China's largest and best freshly made tea brand, it believes that its fundamentals may not be able to support the existing valuation, and recent capital flows have driven its valuation to increase, but the recent upward trend has reflected many positive factors, emphasizing that the capital flow cannot always support the stock price, and it also points out whether Mixue belongs to the new consumer sector, and it believes that Mixue's earnings per share may be far lower than IP companies such as Pop Mart.

Bank of America lowered its rating from neutral to underperforming the market, but based on its strong performance in China's business, it raised its earnings per share forecast for this and next two years by 3.4%, with revenue 2% and 2.2%, respectively, and its target price from HK$400 to HK$465.