Summary
- MINISO's Q1 FY 2023 earnings should meet the market's expectations, but the company's Q2 FY 2023 outlook is likely to be less favorable.
- My rating for MINISO stays as a Hold, taking into account both the favorable corporate actions and the poor business outlook.
- Looking for more investing ideas like this one? Get them exclusively at Asia Value & Moat Stocks.
Corporate Actions In The Spotlight
There are several corporate actions relating to MINISO that investors should watch closely.
At the company's Q4 FY 2022 earnings briefingin late-August, MNSO mentioned that it is now a "dual primary listed company in the U.S. and Hong Kong." MINISO has already successfully listed its shares on the Hong Kong Stock Exchange on July 13, 2022.
Separately, MINISOannouncedon September 29, 2022 that it has "a new share repurchase program" to "repurchase shares up to $100M in value over a period of 12 months." On the same day, MNSO alsodisclosedthat the company's "CEO Guofu Ye plans to buy up to $5M of its stock" within the next one year period.
MNSO's planned share buybacks and its CEO's indication of his intention to do stock purchases imply that the company's shares are most probably cheap. Notably, MINISO's stock price rose by +38% from $4.98 as of September 29, 2022 to close at $6.89 at the end of the November 7, 2022 trading day since its announcement on share repurchases and insider purchases.
In conclusion,MNSO's recent corporate actions is a favorable light. The company's new share buyback program sends a strong message to investor that its shares are undervalued, while its successful Hong Kong listing mitigates the delisting risk for its ADRs.
Q1 FY 2023 Earnings Preview And Q2 FY 2023 Outlook
MINISO is expected to disclose its financial performance for the first quarter of fiscal 2023 in the following week onNovember 14, 2022prior to trading hours.
I take the view that the strength of MINISO's overseas markets would have allowed the company to deliver a decent set of financial results for the first quarter of fiscal 2023 that is line with consensus estimates. MNSO had previously mentioned at its Q4 FY 2022 investor call that it has observed "strong demand growth from distributors" with overseas markets in "the post pandemic era" now.
However, I am less optimistic about MNSO's performance for the second quarter of fiscal 2023 (October 1, 2022 to December 31, 2022 in calendar year terms). Mainland China's pandemic situation appears to have gotten worse in the past week, and this is negative for MINISO's Q2 FY 2023 outlook.
In summary, MNSO's Q1 FY 2023 financial results should be in line with expectations. But I think that the company's Q2 FY 2023 outlook (as indicated by management's comments and remarks at the upcoming Q1 earnings call) might disappoint the market.
Concluding Thoughts
In my view, a Hold rating for MINISO is fair. Investors need to consider both the positives associated with the company's recent corporate actions and the negatives relating to its weak outlook for Q2 FY 2023.
Comments