We attended the 2024 global brand strategy upgrade results conference hosted by Mingchuang Premium. At this press conference, the company further strengthened its IP strategic positioning, plans to build a “global IP co-branded collection store”, and accelerate the upgrading and empowerment of IP products to domestic and foreign channels through experiential stores such as Miniso Land, theme stores, and pop-up stores, as well as the optimization of commercial management cooperation and franchisee support mechanisms. We are optimistic that Q4 will lead to a month-on-month improvement in performance growth along with Harry Potter IP product sales and overseas peak season sales, as well as a steady increase in profitability due to the effectiveness of medium- to long-term IP strategies. Maintain a “buy” rating.

The company's strategy is further deepened to create a leading global IP joint store

Along with the internationalization of the company's business and the continuous advancement of its IP strategy, Mingchuang has now reached extensive cooperation with 150+ IPs around the world. The company updated its brand positioning to a “global IP joint store”. It plans to rely on the company's strong supply chain and innovative design capabilities to enable the differentiation and upgrading of domestic and foreign stores and build a global specialty retail leader integrating must-have and optional consumption. In terms of category layout, the company plans to focus on the four core categories of blind box, plush, travel, and fragrance perfume to meet consumer interest and emotional value needs. It plans to launch a vinyl plush category in collaboration with well-known overseas IPs such as Sanrio and Powerpuff Girls.

The big store strategy is being firmly promoted, and commercial management cooperation is expected to enhance the empowerment of franchisees

At this press conference, the company announced a “seven-tier store system” to refine and stratify channels. Among them, MiniLand (accounting for 70-80% of IP products), China's famous stores, theme stores, and IP pop-up stores have strengthened the positioning of IP co-branded collection stores; flagship/sub-main stores, regular stores, and Miniso Go 3 stores use their channel advantages to block customers. Since its launch, Miniso Land's sales performance has been impressive, with sales exceeding 10 million yuan in the first month of the world's No. 1 store in Shanghai. The company plans to open 100 Miniso Land in China within 5 years and promote the layout of 300 stores around the world in the future. We believe it is expected to help channel structure optimization and IP product launch.

In addition, the company optimizes the commercial management cooperation mechanism, shifts from single store authorization to system authorization, and strengthens support for leading franchisees, which is expected to enhance the ability to select high-quality business districts and open stores efficiently, and help implement major store strategies.

I am optimistic that the release of IP potential will boost Q4's performance and medium- to long-term profitability. With the help of the holiday economy, the company's same-store improvements have improved month-on-month in October. We expect the launch of Harry Potter IP products on global channels at the end of October, which is expected to boost domestic and foreign same-store performance. Combined with the accelerated expansion of overseas stores in the early stages, it is expected that the growth rate and profit performance of Q4 will improve. In the medium to long term, I am optimistic that the company will combine a strong supply chain and IP empowerment to build a cost-effective and differentiated product brand, consolidate competitive barriers, and promote a steady increase in profitability.

Profit forecasting and valuation

We expect an adjusted net profit of $2.88/3.68/4.6 billion for 2024-26, with reference to Bloomberg's 25-year consistent average forecast of 18xPE. Considering the pace of recovery in terminal consumption and the uncertainty of overseas expansion, we will give a small discount of 16 times the adjusted PE in 25 years, maintaining the target price of HK$51.21.

Risk warning: retail competition intensifies, tariff-related policies are disrupted, and progress in overseas store expansion falls short of expectations.