China/Asia TMT

Shawn Yang

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Equity Bottom-Up

<ul>
<li>C2Q23 revenue (1.9%)/2.6% vs. our estimate/consensus, its non-GAAP NI is 18.5%/18.3% higher than estimate/consensus. 1) GPM improvement from revenue mix ; 2) less than expected OPEX from IP licensing fee. </li>
<li>We think Miniso’s strategy to open more flagship stores is in-line with its brand upgrade strategy for seeking price premium beyond value-for-money, which bodes well for its long-term brand value. </li>
<li>We maintain Buy rating and maintain TP at US$26. We raise 2024 EPADS by 6.4% to project lower OPEX with efficiency improvement.</li>
</ul>


C2Q23 revenue (1.9%)/2.6% vs. our estimate/consensus, its non-GAAP NI is 18.5%/18.3% higher than estimate/consensus. 1) GPM improvement from revenue mix ; 2) less than expected OPEX from IP licensing fee. 
We think Miniso’s strategy to open more flagship stores is in-line with its brand upgrade strategy for seeking price premium beyond value-for-money, which bodes well for its long-term brand value. 
We maintain Buy rating and maintain TP at US$26. We raise 2024 EPADS by 6.4% to project lower OPEX with efficiency improvement.


[Miniso Group (MNSO US, BUY, TP US$26) Review]: Strong Demand Support Further Store Openings

<ul>
<li>We expect MNSO to report C2Q23 revenue 4.6% higher than cons and non-GAAP NI in-line with cons. The beat is due to strong sales from larger ticket size &amp;store expansion.  </li>
<li>We think the brand upgrade strategy had effectively drove up Miniso stores’ blended ASP, combined with mild recovery of foot traffic, leading to 46% YoY growth in China revenue.</li>
<li>Besides, we anticipate 37% YoY growth in oversea revenue and 43% YoY growth in total revenue in C2Q23. We maintain Buy rating and raise TP by US$0.5 to US$26.</li>
</ul>


We expect MNSO to report C2Q23 revenue 4.6% higher than cons and non-GAAP NI in-line with cons. The beat is due to strong sales from larger ticket size &amp;store expansion.  
We think the brand upgrade strategy had effectively drove up Miniso stores’ blended ASP, combined with mild recovery of foot traffic, leading to 46% YoY growth in China revenue.
Besides, we anticipate 37% YoY growth in oversea revenue and 43% YoY growth in total revenue in C2Q23. We maintain Buy rating and raise TP by US$0.5 to US$26.


[Miniso Group (MNSO US, BUY, TP US$26) TP Change]: Shifting from Value- To Interest-Based Retailer

<ul>
<li>MNSO reported its C1Q23 revenue (3.7%)/1.1% vs. our estimate/consensus, while non-GAAP net income beat our estimate/consensus by 17.7%/26.1% respectively, driven by gross margin ramp-up strategy and G&amp;A reduction; </li>
<li>We think MNSO’s brand upgrade strategy is success so far, as it offered more high gross margin products without significantly diluting sales. </li>
<li>We maintain Buy rating and raise TP by US$0.5 to US$25.5 to factor in the better gross margin and store expansion outlook.</li>
</ul>


MNSO reported its C1Q23 revenue (3.7%)/1.1% vs. our estimate/consensus, while non-GAAP net income beat our estimate/consensus by 17.7%/26.1% respectively, driven by gross margin ramp-up strategy and G&amp;A reduction; 
We think MNSO’s brand upgrade strategy is success so far, as it offered more high gross margin products without significantly diluting sales. 
We maintain Buy rating and raise TP by US$0.5 to US$25.5 to factor in the better gross margin and store expansion outlook.


[Miniso Group (MNSO US) Target Price Change]: Brand Upgrade Strategy Bears Fruit…Reiterate BUY

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<ul>
<li>Despite a 15% drop in March 2023, <a href="https://www.smartkarma.com/entities/miniso-group-holdings" target="_blank" data-smartkarma-citation="entities:29673:1" rel="noopener">Miniso (MNSO US)</a> remains relatively expensive compared to peers, having rallied 330% between October 2022 and March 2023.</li>
<li>We think this is a good opportunity to short <a href="https://www.smartkarma.com/entities/miniso-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:36659:1" rel="noopener">MINISO Group Holding (9896 HK)</a> as we see around 35% downside purely from a valuation angle.</li>
<li>Meanwhile, red flags like insider selling, Blue Orca's accusations, senior management departures, and a mature domestic market could send the share price back below $5.0.</li>
</ul>


Despite a 15% drop in March 2023, Miniso (MNSO US) remains relatively expensive compared to peers, having rallied 330% between October 2022 and March 2023.
We think this is a good opportunity to short MINISO Group Holding (9896 HK) as we see around 35% downside purely from a valuation angle.
Meanwhile, red flags like insider selling, Blue Orca's accusations, senior management departures, and a mature domestic market could send the share price back below $5.0.


Miniso: Investors Turning a Blind Eye to Red Flags in Miniso

<ul>
<li>We expect Miniso to report C1Q23 revenue, operating profit, and net income 3.6%, 18.3% and 16.7% higher than consensus. </li>
<li>We think the strong foot traffic to offline stores post CNY bodes well for Miniso’s domestic store sales in 2023;</li>
<li>We maintain the Buy rating, and raise TP by US$1 to US$25 to factor in the sales recovery from higher foot traffic and ARPU.</li>
</ul>


We expect Miniso to report C1Q23 revenue, operating profit, and net income 3.6%, 18.3% and 16.7% higher than consensus. 
We think the strong foot traffic to offline stores post CNY bodes well for Miniso’s domestic store sales in 2023;
We maintain the Buy rating, and raise TP by US$1 to US$25 to factor in the sales recovery from higher foot traffic and ARPU.


[Miniso Group (MNSO US）]: Strong Offline Traffic Bodes Well for C1Q23 Growth

China

MINISO Group Holding is a value retailer with a focus on offering products that are aesthetically pleasing, good-quality, and affordable.

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Miniso (MNSO US)

[Miniso Group (MNSO US, BUY, TP US$26) Review]: Strong Demand Support Further Store Openings

We think Miniso’s strategy to open more flagship stores is in-line with its brand upgrade strategy for seeking price premium beyond value-for...

Blue Lotus Research Institute

[Miniso Group (MNSO US, BUY, TP US$26) TP Change]: Shifting from Value- To Interest-Based Retailer

We expect MNSO to report C2Q23 revenue 4.6% higher than cons and non-GAAP NI in-line with cons. The beat is due to strong sales from larger ticket...

Blue Lotus Research Institute

[Miniso Group (MNSO US) Target Price Change]: Brand Upgrade Strategy Bears Fruit…Reiterate BUY

We think MNSO’s brand upgrade strategy is success so far, as it offered more high gross margin products without significantly diluting sales.

Blue Lotus Research Institute

Miniso: Investors Turning a Blind Eye to Red Flags in Miniso

Investors have overlooked insider selling, Blue Orca's allegations, management departures, and market saturation. Despite this, we see a 35%...

Oshadhi Kumarasiri

[Miniso Group (MNSO US）]: Strong Offline Traffic Bodes Well for C1Q23 Growth

We expect Miniso to report C1Q23 revenue, operating profit, and net income 3.6%, 18.3% and 16.7% higher than consensus. Raise TP by US$1 to US$25 .

Blue Lotus Research Institute

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