Key Points Summary from the 2026 First Quarter Financial Report of Ba Wang Cha Ji
Ba Wang Cha Ji’s financial report for the first quarter of 2026 shows the following figures: revenue of 3.546 billion yuan (a year-on-year increase of 4.52%) and net profit of 447 million yuan (a year-on-year decrease of 33.91%). However, the stock price surged by more than 25% in a single day. The key reasons for this are as follows:
- The company turned from losses to profits on a quarter-on-quarter basis, with the operating profit margin recovering to 17.1%.
- It introduced a share repurchase plan worth $150 million for the first time.
- The gross merchandise value (GMV) in overseas markets increased by 139% year-on-year.
- Although the expansion of direct-operated stores increased costs in the short term, it will boost the gross profit margin in the long run.
- The company has intentionally slowed down its domestic store expansion and is focusing on the quality of each individual store. Management believes that the stock price is significantly undervalued and is confident about the future prospects.
Detailed Analysis
#### 1. Why Did the Stock Price Rise Despite Profit Decline?
Many people may wonder why the stock price increased when profits decreased. In fact, the market focuses on “future expectations” rather than just past year-on-year data.
- Quarter-on-quarter improvement is crucial: Although the net profit decreased by 33% year-on-year, it turned from a loss to a profit compared to the previous quarter (2025Q4). The operating profit margin has also recovered from a low point to 17.1%, indicating that business operations are improving.
- The repurchase plan boosts confidence: The company announced plans to repurchase $150 million in shares over the next 12 months, signaling to the market with concrete actions that it believes the stock price is too low. This reassures investors and encourages them to buy the company’s stocks.
- Outstanding overseas growth: The doubling of GMV in overseas markets demonstrates the success of the internationalization strategy and positive long-term potential.
These factors combined have a stronger impact on the market than just the year-on-year profit decline, which is why the stock price increased by 25%.
#### 2. The “Short-Term Pain” of Profit Decline: The Cost of Direct-Operated Expansion
The profit decrease is mainly due to the company’s shift in business model from a franchise-based model to a direct-operated model, leading to higher short-term costs.
- Increase in direct-operated store costs: The number of direct-operated stores increased by 175, while the number of franchise stores decreased by 97. Since the company is responsible for managing direct-operated stores, it incurs expenses such as salaries, rent, and utilities, resulting in a 216.6% increase in operating costs (from 157 million yuan to 497 million yuan).
- Benefits of direct operation: Direct-operated stores generate higher gross profits. Direct-operated revenue increased by 2.3 times year-on-year to 802 million yuan, accounting for over 20% of total revenue, which helped raise the overall gross profit margin to 55.6%. This means that investing more in direct operations now will lead to greater profits in the future.
- Optimization of other costs: The company has reduced staff and restructured, cutting labor costs by 20.4 million yuan and lowering other operational expenses by 7.8%, indicating efforts to control unnecessary expenditures.
#### 3. Overseas Markets as a Boost: Doubling of GMV and Accelerated Global Expansion
Overseas markets were the highlight of this financial report, with growth far outpacing that in domestic markets.
- Strong overseas performance: The first-quarter overseas GMV was 426 million yuan, a year-on-year increase of 139%. The company has 374 stores in countries such as Malaysia, Singapore, and Thailand.
- Successful new market launches: Three new stores were opened in South Korea in April, with some stores experiencing more than two-hour waiting times for customers. The first store in Macau opened in May. The company has also established its Asia-Pacific headquarters in Singapore and its North American headquarters in the United States, completing its international expansion framework.
- Localized strategies working: For example, using locally adapted products in Malaysia has helped reduce the decline in sales at existing stores, indicating that the expansion is tailored to local markets.
#### 4. Slowing Down Domestic Expansion: Focusing on Store Quality and Revising the Franchise Model
The company may have expanded too quickly domestically and is now slowing down to focus on improving the profitability of each individual store.
- Reduced domestic franchise expansion: The number of domestic franchise stores decreased by 97 in the first quarter. Instead of focusing on quantity, the company is prioritizing sales per store. Management stated that they will not lower prices to attract customers, avoiding price wars that could harm profits.
- Upgraded franchise model: At the beginning of the year, the fixed franchise fee was replaced by a profit-sharing model based on GMV. This aligns the interests of both parties, motivating franchisees to improve store performance and increase profitability.
- Improving same-store sales: Same-store sales decreased by 16% year-on-year, but this is an improvement compared to the 25.5% decline in the previous quarter, indicating that the company’s strategies (such as using AI, launching new products, and expanding business hours) are starting to yield results.
#### 5. Management’s Confidence: Sufficient Cash for Repurchases and a Bright Future
Management’s confidence is backed by solid financial strength.
- Ample cash reserves: As of the end of the first quarter, the company had a total of 7.15 billion yuan in cash and deposits, which is more than enough to cover the $150 million repurchase (about 1 billion yuan), indicating no shortage of funds.
- Clear strategic focus: The company plans to improve products, services, the shopping experience, and brand value, all of which will enhance its competitiveness in the long term.
- Key indicator for market outlook: Whether the company can continue to grow depends on whether same-store sales can turn from negative to positive. If store performance continues to improve, profits will recover, and the stock price will become more stable.
Conclusion
Ba Wang Cha Ji is currently in a phase of “short-term pain leading to long-term growth.” While direct-operated expansion and internationalization are beneficial in the long run, they have caused temporary profit declines. However, the company’s improved performance on a quarter-on-quarter basis, the repurchase plan, and strong overseas growth have boosted market confidence. As long as same-store sales continue to improve, the company has significant potential for the future. When analyzing financial reports like this, it is important to consider more than just profit figures; instead, one should look at the underlying structural changes and signs of growth.