This week’s posts are focused on equity research (we will resume macro analysis next week) and are public to all. These notes were compiled by Staff Analyst Tim Chang and are meant to be a brief overview of the comprehensive research done on recently initiated coverage.
MINISO is the largest branded variety retailer of lifestyle products globally and in China. The first store was opened in 2003 in China. It sells the products under its own brands "MINISO". As of September, MINISO has 6.1K stores globally with 3.8k stores in China and 2.2k stores in around 100 countries. Its founder, Guofu Ye, is the controlling shareholder with 72.5% stake.
MINISO has consistently delivered strong financial performance, including a 54% increase in adjusted net profit to RMB 642 million, driven by a 37% revenue growth and gross margin expansion. The company's growth is underpinned by its effective supply chain, anchored in China's vast resources, and a retail partner model that facilitates scalable expansion. MINISO's product assortment, frequently refreshed, ensures ongoing consumer attraction and repurchase.
IP product serves as important part of MINISO’s sales (24-25% of total), and normally enjoys high-single digit margin premium to normal products. On back of encouraging demand and better profitability, the company expects IP product’s contribution to reach 30% in the future. MINISO believes that they enjoy several competitive edges to be selected by IP licensors: 1) Large global network to enable sales and ensure high exposure. 2) Long track record with successful cases with many IPs. 2) Higher standards on design and product development.
The retail sector, particularly branded variety retailers, has seen robust growth. MINISO's expansion strategy, both in China and internationally, has been successful, indicating the brand's scalability and adaptability in various markets. MINSO does not try to compete with eCommerce platforms on pricing, but rather focusing on product differentiation and design (all private labelled products)
Risks include global economic volatility, competition within the retail sector, reliance on retail partners and distributors, execution risk in new markets, inventory management, foreign exchange fluctuations, and dependence on key personnel.
Recently the stock has declined ~30% despite no news on the company. MINISO dropped a press release discussing the “unusual price and trading”, stating: “it is not aware of any reason for the recent fluctuation of the price of the Shares or trading volume movements, or of any information that is required to be disclosed… As at the date of this announcement, the business of the Group is running normally and smoothly. There were no significant adverse changes in the daily operations and financial positions of the Group.”
The company also noted that management would be acquiring shares in the open market over the next month. We view the pullback as an interesting opportunity, though are cautious of the fact that the reasons for the decline is still unknown.
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