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

Equity Bottom-Up

<ul>
<li>C2Q23 revenue (1.9%)/2.6% vs. our estimate/consensus, its non-GAAP NI is 18.5%/18.3% higher than estimate/consensus. 1) GPM improvement from revenue mix ; 2) less than expected OPEX from IP licensing fee. </li>
<li>We think Miniso’s strategy to open more flagship stores is in-line with its brand upgrade strategy for seeking price premium beyond value-for-money, which bodes well for its long-term brand value. </li>
<li>We maintain Buy rating and maintain TP at US$26. We raise 2024 EPADS by 6.4% to project lower OPEX with efficiency improvement.</li>
</ul>


C2Q23 revenue (1.9%)/2.6% vs. our estimate/consensus, its non-GAAP NI is 18.5%/18.3% higher than estimate/consensus. 1) GPM improvement from revenue mix ; 2) less than expected OPEX from IP licensing fee. 
We think Miniso’s strategy to open more flagship stores is in-line with its brand upgrade strategy for seeking price premium beyond value-for-money, which bodes well for its long-term brand value. 
We maintain Buy rating and maintain TP at US$26. We raise 2024 EPADS by 6.4% to project lower OPEX with efficiency improvement.


[Miniso Group (MNSO US, BUY, TP US$26) Review]: Strong Demand Support Further Store Openings

Thematic (Sector/Industry)

<ul>
<li>The slew of negative economic data for July traces its root to the inadequacy of industries Chinese government wants to promote towards generating employment, income and investments;</li>
<li>With overwhelming advantage in financing, US’s reshoring initiative is bound to succeed in its first iteration. </li>
<li>For China, boosting demand is no longer an option. Exporting deflation might be the only answer.</li>
</ul>


The slew of negative economic data for July traces its root to the inadequacy of industries Chinese government wants to promote towards generating employment, income and investments;
With overwhelming advantage in financing, US’s reshoring initiative is bound to succeed in its first iteration. 
For China, boosting demand is no longer an option. Exporting deflation might be the only answer.


[Blue Lotus Macro]: Underestimating the Pain but Unable to Turn Back

<ul>
<li>We view the rallies in Chinese Internet and Consumer names to be sustainable in C3Q23 as regulatory environment to be both favourable and macro environment to be conducive; </li>
<li>Our China Internet top picks are Meituan and Tencent, and investors could buy PDD and NetEase after 2Q23 earnings. </li>
<li>Domestic consumption will also bottom out, but sustainability only confines to a few, our top picks in China consumer names are Miniso, Luckin Coffee, and Atour.</li>
</ul>


We view the rallies in Chinese Internet and Consumer names to be sustainable in C3Q23 as regulatory environment to be both favourable and macro environment to be conducive; 
Our China Internet top picks are Meituan and Tencent, and investors could buy PDD and NetEase after 2Q23 earnings. 
Domestic consumption will also bottom out, but sustainability only confines to a few, our top picks in China consumer names are Miniso, Luckin Coffee, and Atour.


[Blue Lotus Sector Update]: Time to Buy China Internet and Consumer Names

<ul>
<li>We expect MNSO to report C2Q23 revenue 4.6% higher than cons and non-GAAP NI in-line with cons. The beat is due to strong sales from larger ticket size &amp;store expansion.  </li>
<li>We think the brand upgrade strategy had effectively drove up Miniso stores’ blended ASP, combined with mild recovery of foot traffic, leading to 46% YoY growth in China revenue.</li>
<li>Besides, we anticipate 37% YoY growth in oversea revenue and 43% YoY growth in total revenue in C2Q23. We maintain Buy rating and raise TP by US$0.5 to US$26.</li>
</ul>


We expect MNSO to report C2Q23 revenue 4.6% higher than cons and non-GAAP NI in-line with cons. The beat is due to strong sales from larger ticket size &amp;store expansion.  
We think the brand upgrade strategy had effectively drove up Miniso stores’ blended ASP, combined with mild recovery of foot traffic, leading to 46% YoY growth in China revenue.
Besides, we anticipate 37% YoY growth in oversea revenue and 43% YoY growth in total revenue in C2Q23. We maintain Buy rating and raise TP by US$0.5 to US$26.


[Miniso Group (MNSO US, BUY, TP US$26) TP Change]: Shifting from Value- To Interest-Based Retailer

<ul>
<li>700.HK/NTES/BILI: Tencent, NetEase and Bilibili receive game code approvals (+)</li>
<li>ZLAB：First generic version of Olaparib approved in China but impact on Nariparib should be small（/）</li>
<li>MNSO: Miniso opened its global flagship store in NY Times Square with 78k sales in first day</li>
</ul>


700.HK/NTES/BILI: Tencent, NetEase and Bilibili receive game code approvals (+)
ZLAB：First generic version of Olaparib approved in China but impact on Nariparib should be small（/）
MNSO: Miniso opened its global flagship store in NY Times Square with 78k sales in first day


China TMT Update(May 24) - 700.HK/NTES/BILI/ZLAB/MNSO: Tencent, NetEase, Bilibili Receive Game Code

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)

[Miniso Group (MNSO US, BUY, TP US$26) Review]: Strong Demand Support Further Store Openings

We think Miniso’s strategy to open more flagship stores is in-line with its brand upgrade strategy for seeking price premium beyond value-for...

Blue Lotus Research Institute

[Blue Lotus Macro]: Underestimating the Pain but Unable to Turn Back

The slew of negative economic data for July traces its root to the inadequacy of industries Chinese government wants to promote towards generating...

Blue Lotus Research Institute

[Blue Lotus Sector Update]: Time to Buy China Internet and Consumer Names

We view the rallies in Chinese Internet and Consumer names to be sustainable in C3Q23 as regulatory environment to be both favourable and macro...

Blue Lotus Research Institute

[Miniso Group (MNSO US, BUY, TP US$26) TP Change]: Shifting from Value- To Interest-Based Retailer

We expect MNSO to report C2Q23 revenue 4.6% higher than cons and non-GAAP NI in-line with cons. The beat is due to strong sales from larger ticket...

Blue Lotus Research Institute

China TMT Update(May 24) - 700.HK/NTES/BILI/ZLAB/MNSO: Tencent, NetEase, Bilibili Receive Game Code

700.HK/NTES/BILI: Tencent, NetEase and Bilibili receive game code (+)；ZLAB：First generic version of Olaparib approved in China（/）；MNSO: Miniso...

Blue Lotus Research Institute

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