China/Asia TMT

Shawn Yang

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Thematic (Sector/Industry)

<ul>
<li>We see the future, post decoupling world to have two operating systems, one surrounding US and the other surrounding China.</li>
<li>Both US and China will develop respective partners to complete their ecosystems. We will soon have a world running on two sets of standards</li>
<li>While the western world dominates the old order and the new frontiers, China is leading in the new order of energy, drug and manufacturing.</li>
</ul>


We see the future, post decoupling world to have two operating systems, one surrounding US and the other surrounding China.
Both US and China will develop respective partners to complete their ecosystems. We will soon have a world running on two sets of standards
While the western world dominates the old order and the new frontiers, China is leading in the new order of energy, drug and manufacturing.


[Blue Lotus Sector Update]: All Will Have a Bright Future

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

<ul>
<li>Despite a 15% drop in March 2023, <a href="https://www.smartkarma.com/entities/miniso-group-holdings" target="_blank" data-smartkarma-citation="entities:29673:1" rel="noopener">Miniso (MNSO US)</a> remains relatively expensive compared to peers, having rallied 330% between October 2022 and March 2023.</li>
<li>We think this is a good opportunity to short <a href="https://www.smartkarma.com/entities/miniso-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:36659:1" rel="noopener">MINISO Group Holding (9896 HK)</a> as we see around 35% downside purely from a valuation angle.</li>
<li>Meanwhile, red flags like insider selling, Blue Orca's accusations, senior management departures, and a mature domestic market could send the share price back below $5.0.</li>
</ul>


Despite a 15% drop in March 2023, Miniso (MNSO US) remains relatively expensive compared to peers, having rallied 330% between October 2022 and March 2023.
We think this is a good opportunity to short MINISO Group Holding (9896 HK) as we see around 35% downside purely from a valuation angle.
Meanwhile, red flags like insider selling, Blue Orca's accusations, senior management departures, and a mature domestic market could send the share price back below $5.0.


Miniso: Investors Turning a Blind Eye to Red Flags in Miniso

<ul>
<li>We expect Miniso to report C1Q23 revenue, operating profit, and net income 3.6%, 18.3% and 16.7% higher than consensus. </li>
<li>We think the strong foot traffic to offline stores post CNY bodes well for Miniso’s domestic store sales in 2023;</li>
<li>We maintain the Buy rating, and raise TP by US$1 to US$25 to factor in the sales recovery from higher foot traffic and ARPU.</li>
</ul>


We expect Miniso to report C1Q23 revenue, operating profit, and net income 3.6%, 18.3% and 16.7% higher than consensus. 
We think the strong foot traffic to offline stores post CNY bodes well for Miniso’s domestic store sales in 2023;
We maintain the Buy rating, and raise TP by US$1 to US$25 to factor in the sales recovery from higher foot traffic and ARPU.


[Miniso Group (MNSO US）]: Strong Offline Traffic Bodes Well for C1Q23 Growth

<ul>
<li>Even though we are long-term optimistic on the rise of Chinese consumer brands, we believe short-term optimism is misplaced. </li>
<li>Two themes: (1) structural changes led by China’s transition to an older and more affluent society, (2) substitution and globalization that can break the ceiling for valuation;</li>
<li>Our TOP PICKS are Li Auto, Atour, Luckin, FUTU, BEKE and Miniso</li>
</ul>


Even though we are long-term optimistic on the rise of Chinese consumer brands, we believe short-term optimism is misplaced. 
Two themes: (1) structural changes led by China’s transition to an older and more affluent society, (2) substitution and globalization that can break the ceiling for valuation;
Our TOP PICKS are Li Auto, Atour, Luckin, FUTU, BEKE and Miniso


[Consumer Brands Deep Dive]:Structural and Substitution Drive Chinese Consumer

<ul>
<li>Miniso reported its C4Q22 revenue at RMB2,494mn, (2.6%)/1.1% vs. our estimate/consensus,  non-GAAP net income at RMB373mn, 27.8%/29.0% higher than our estimate/consensus; </li>
<li>We expect Miniso’s revenue to achieve 33% YoY in C2023, driven by 1) the store expansion in both domestic and overseas market, 2) domestic single store revenue recovered;</li>
<li>We maintain the stock as BUY rating, and raise TP by US$2 to US$24, reflecting Miniso’s expansion of domestic store network in low tier cities</li>
</ul>


Miniso reported its C4Q22 revenue at RMB2,494mn, (2.6%)/1.1% vs. our estimate/consensus,  non-GAAP net income at RMB373mn, 27.8%/29.0% higher than our estimate/consensus; 
We expect Miniso’s revenue to achieve 33% YoY in C2023, driven by 1) the store expansion in both domestic and overseas market, 2) domestic single store revenue recovered;
We maintain the stock as BUY rating, and raise TP by US$2 to US$24, reflecting Miniso’s expansion of domestic store network in low tier cities


[Miniso Group (MNSO US) Target Price Change]: 2023 Catalyst Is Store Expansion, Raise TP to US$24

China

MINISO Group Holding is a value retailer with a focus on offering products that are aesthetically pleasing, good-quality, and affordable.

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Miniso (MNSO US)

[Blue Lotus Sector Update]: All Will Have a Bright Future

We see the future, post decoupling world to have two operating systems, one surrounding US and the other surrounding China.

Blue Lotus Research Institute

Miniso: Investors Turning a Blind Eye to Red Flags in Miniso

Investors have overlooked insider selling, Blue Orca's allegations, management departures, and market saturation. Despite this, we see a 35%...

Oshadhi Kumarasiri

[Miniso Group (MNSO US）]: Strong Offline Traffic Bodes Well for C1Q23 Growth

We expect Miniso to report C1Q23 revenue, operating profit, and net income 3.6%, 18.3% and 16.7% higher than consensus. Raise TP by US$1 to US$25 .

Blue Lotus Research Institute

[Consumer Brands Deep Dive]:Structural and Substitution Drive Chinese Consumer

Chinese underconsumption is only half true. It only occurs in categories associated with development stages; Our TOP PICKS are Li Auto, Atour,...

Blue Lotus Research Institute

[Miniso Group (MNSO US) Target Price Change]: 2023 Catalyst Is Store Expansion, Raise TP to US$24

We expect Miniso’s revenue to achieve 33% YoY in C2023, driven by 1) the store expansion in both domestic and overseas market, 2) domestic single...

Blue Lotus Research Institute

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