Core views:
Incident: The company disclosed its quarterly financial report for October-December '23. The quarter achieved revenue of 3.84 billion yuan (same below), +54.0% year over year, and non-IFRS net profit of 660 million yuan, +77.0% year over year. Revenue and profit slightly exceeded expectations. In terms of revenue structure, the company's domestic revenue for the quarter was 2.35 billion yuan, +55.7%. Among them, MINISO offline store revenue was +63.2%, TOPTOY revenue exceeded 190 million yuan, +90% year over year; overseas revenue was 1.49 billion yuan, +51.4% year over year, accounting for -0.6 pp to 38.9% year on year, of which overseas direct sales increased by more than 80% year on year.
Both gross and net profit margins have increased. (1) The company's gross profit margin for the quarter was 43.1%, +3.1 pp year over month, a record high, mainly due to: ① optimization of the product portfolio and direct management share in overseas markets increased from 42% in the same period in '22 to more than 50%, driving overseas market gross margin growth; ② the product portfolio shifting to products with higher profitability; ③ TOPTOY's gross margin increase.
(2) The cost rate for the period was 22.6%, +1.0pp compared to the previous year. Among them, the sales expense ratio was +2.1pp to 18.8% year-on-year, mainly due to: ① increased business personnel expenses, logistics expenses, and IP licensing fees; ② increased depreciation costs associated with direct-run stores; ③ increased advertising expenses related to brand upgrades and new overseas stores. The management expense ratio was -1.0pp to 4.9% year over year. (3) Non-IFRS net interest rate was 17.2%, +2.2pp year on year and +0.3pp month-on-month, and profitability remained high.
In terms of stores, according to the company's financial report, MINISO had a net increase of 298 stores to 6413 in the current quarter, with a net increase of 124 to 3,926 stores in China, 174 to 2,487 overseas, a total net increase of 601 domestic stores in the 2023 natural year, and a net increase of 372 overseas stores, all of which completed the plan in early '23. TOPTOY had a net increase of 26 stores this quarter to 148.
Profit forecast and investment advice: The company has excellent comprehensive capabilities, the restoration of store efficiency and store expansion are being promoted together, and performance growth can be expected. The adjusted net profit for the 24-26 fiscal year is estimated to be $26.1, 32.0, and 3.87 billion yuan, respectively, giving the company 20 times PE in FY25, corresponding to the reasonable value of US stocks of US$28.24 per ADS and the reasonable value of Hong Kong stocks of HK$55.22/share, all maintaining a “buy” rating.
Risk warning: Store expansion falls short of expectations; IP expansion falls short of expectations; product quality issues.