First Shanghai released a research report stating that it maintains a "buy" rating for Miniso (09896), expecting adjusted net income for 2024-2026 to be 2.81/3.57/4.34 billion yuan respectively, thus giving a target price of 58.29 HKD. As a global leader in private label comprehensive retail, the company has extensive space for store expansion both domestically and internationally. Looking ahead, with the increasing share of overseas sales, brand upgrades, and deepening implementation of the super IP strategy, the company's profitability is expected to continue to improve.

Performance overview: From Q1 to Q3 2024, revenue reached 12.281/4.523 billion yuan, a year-on-year increase of +22.8%/+19.3%. Adjusted net income was 1.928/0.686 billion yuan, a year-on-year increase of +13.7%/+6.9%, with an adjusted net margin of 15.7%/15.2%.

First Shanghai's main points are as follows:

Domestic same-store performance is under pressure, but the IP strategy has steadily increased the average transaction value.

Domestic Miniso Q1-3/Q3 achieved revenue of 7.03/2.44 billion yuan, a year-on-year increase of +14.0%/+5.7%. As of September 2024, the number of domestic Miniso stores reached 4,250, with a net increase of 135 stores in Q3. It is expected that under the sales boost of the IP strategy, same-store performance in high-tier cities will outperform that in low-tier cities. TOPTOY Q1-3/Q3 achieved revenue of 0.7/0.27 billion yuan, a year-on-year increase of +42.5%/+50.4%. Q1-3 TOPTOY's revenue growth was impressive, mainly due to unit sales growth in same-store sales and rapid growth in average store numbers. As of September 2024, the number of TOPTOY stores reached 234, with a net increase of 86/39 stores in Q1-3/Q3.

Overseas store expansion is steady, with expectations for performance release during the Q4 peak season.

Overseas Miniso Q1-3/Q3 achieved revenue of 4.54/1.81 billion yuan, a year-on-year increase of +41.5%/+39.8%. Among them, Q1-3 direct/agency market revenue reached 2.448/2.095 billion yuan, a year-on-year increase of +54%/+46%. As of September 2024, the number of overseas Miniso stores reached 2,936, with a net increase of 183 stores in Q3. Q1-3 overseas same-store sales achieved high single-digit growth, regionally, Latin America/North America/Asia/Europe achieved same-store sales growth of 10-20% low-range/middle single-digit/high single-digit/low single-digit respectively, with net increases of 14/60/88/16 stores in Q3. It is expected that with the arrival of the Q4 overseas peak season, combined with the Harry Potter IP catalyst, overseas sales performance will likely see further release.

Gross margin reached a new high, and the sales expense ratio increased by 5.1 percentage points year-on-year.

In terms of gross margin, the company achieved a gross margin of 44.1% in Q1-3, an increase of 3.7 percentage points year-on-year. In Q3, the company's gross margin increased by 3.1 percentage points year-on-year to 44.9%, setting a new record. The improvement in the gross margin for Q1-3 is mainly attributed to 1) the increase in the proportion of overseas revenue and the contribution of revenue from overseas direct sales markets, with the contribution of overseas revenue rising from 32% last year to 37% this year, and the revenue share from overseas direct sales markets increasing from 14.9% last year to 19% this year; 2) effective execution of the IP strategy led to a mid-to-high single-digit improvement in the gross margin of miniso and TOPTOY overseas. In terms of expense ratios, in Q1-3/Q3, the company's selling expense ratio was 20.5%/22.0%, an increase of 4.9/5.1 percentage points year-on-year, mainly due to accelerated store expansion in overseas direct sales markets, resulting in increased costs related to rent, depreciation, amortization, and wages; the company’s administrative expense ratio was 5.3%/5.2%, an increase of 0.4/0.7 percentage points year-on-year, mainly due to the growth of personnel-related expenses associated with business growth.