CICC released a research report expressing optimism about MINISO Group Holding Limited's (09896) refined operations and continuous efficiency improvements in both domestic and international businesses. Management expects 4Q25 revenue to grow 25-30% YoY, with low double-digit same-store sales growth in both China and the U.S. Due to gross margin fluctuations and expense allocation, the adjusted net profit forecast for 2025 remains largely unchanged at RMB 2.9 billion, while the 2026 forecast is lowered by 4% to RMB 3.6 billion. The current Hong Kong/U.S. stock valuations correspond to 15x 2025 non-IFRS P/E, and CICC maintains its "Outperform Industry" rating for both markets. Considering industry valuation adjustments, the target prices for Hong Kong/U.S. stocks are lowered by 12%/11% to HK$50.18/US$26.08, representing 20x 2025 non-IFRS P/E and offering 28%/33% upside potential.
Key highlights from CICC: 1. **3Q25 Performance in Line with Expectations**: MINISO reported 3Q25 revenue growth of 28% YoY to RMB 5.8 billion, with adjusted net profit up 12% YoY to RMB 770 million, meeting expectations.
2. **Domestic Business Recovery and TOPTOY’s Strong Growth**: Domestic revenue rose 19% YoY to RMB 2.9 billion, driven by IP-focused strategies, strong performance in key categories like toys (with 16 signed IP artists), and effective store expansion (102 net new stores). Online sales surged 58% YoY to RMB 340 million. TOPTOY revenue jumped 111% YoY to RMB 580 million, supported by proprietary IP products and mid-single-digit same-store sales growth, with 14 net new stores opened.
3. **Overseas Direct-operated Markets Show Steady Efficiency Gains**: Overseas revenue grew 28% YoY to RMB 2.3 billion, led by the U.S. (up over 65% YoY). Localized operations and optimized product assortments contributed to low single-digit same-store sales growth, with low double-digit growth in direct-operated markets like the U.S. and Canada. The company added 117 net new overseas stores and plans to replicate its China-U.S. success in Southeast Asia for sustainable profit growth.
4. **Expense Pressure Eases as Planned (Excluding Share-based Compensation)**: 3Q25 gross margin dipped slightly by 0.2 ppt YoY due to product mix adjustments. Excluding RMB 180 million in share-based compensation (mainly tied to TOPTOY incentives), SG&A ratios improved (+1.4 ppt/-0.3 ppt YoY), with overseas direct-operated business operating margins up by low single digits. Net financial expenses of RMB 100 million (including RMB 150 million losses from Yonghui-related transactions and RMB 70 million other income) were adjusted out, resulting in a 12% YoY rise in adjusted net profit to RMB 770 million.
**Risks**: Weaker-than-expected retail environment, slower store expansion, and setbacks in new business initiatives.
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