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

Hainan Island Construction Co Ltd.  is a property development company. The Company also operates regional malls and hotels.

Guangzhou Friendship Group Co., Ltd operates supermarkets and department stores in Guangzhou, China.  The Company sells a variety of consumer products, including apparel, food and beverages, electronics, jewelry, cosmetics, and electric appliances.  Guangzhou Friendship also leases real estate properties.

Guangzhou Friendship Group Co, Ltd. (000987 CH)

Wangfujing Group Co., Ltd. owns and operates department stores in Beijing, Guangzhou, Chengdu, Wuhan, and other cities in China.  The Company also develops residential real estate.

Golden Eagle Retail Group Limited operates department stores in China. The Company's stores target mid-range and high-end market segments in China, and contain various functions and amenities such as dining, entertainment, beauty and personal care, cinemas, and preschool education in addition to their core function as an international department store.

Tianjin Quanye Bazaar (Group) Co., Ltd. owns and operates department stores and supermarkets, as well as sells general merchandise on a wholesale basis. Tianjin Quanye also provides storage and cargo delivery services, and invests in real estate and interior decoration businesses.

Xian International Medical Investment Co Ltd is principally engaged in the medical services industry.

Xian International Medical Invest (000516 CH)

Nanjing Xinjiekou Department Store Co. Ltd. operates department stores in Nanjing, Jiangsu.  Through its subsidiaries, the Company also develops real estate and manufactures pharmaceuticals.

Nanjing Xinjiekou Department S (600682 CH)

Beijing Urban-Rural Trade Centre Co. Ltd. operates department stores and supermarkets. The Company also provides food and entertainment services, as well as develops real estate.

Beijing Urban Rural Trade Centre Co. (600861 CH)

Chengdu Hongqi Chain Company Limited operates convenience stores chain. The Company's main products are food, alcoholic drinks and tobacco, and other daily necessities.

Chongqing Department Store Co., Ltd. operates retail stores in Chongqing.  The Company also operates a wholesale business.

Chongqing Department Store Co. (600729 CH)

Harvey Norman Holdings Limited is a holding company for companies and trusts in a third party franchise agreement. The franchises operate stores under the name "Harvey Norman Discounts," selling home wares and electrical goods. The Company also provides advisory and advertising to the franchises. In addition, the Company provides consumer finance and has property investments.

RYOHIN KEIKAKU CO., LTD. is a retailer and wholesaler of Mujirushi Ryohin brand products, which were originally a generic private-brand product.  The Company's product line includes knitwear, food, and household items

Ollie's Bargain Outlet Holdings, Inc. operates a chain of retail stores that offers brand name products at discounted and closeout prices. The Company provides products, including housewares, food, books and stationery, bed and bath, floor coverings, toys, and hardware.

Ollie'S Bargain Outlet Holdings (OLLI US)

Dillard's, Inc. operates retail department stores located primarily in the southwestern, southeastern, and midwestern United States. The Company offers name-brand and private-label merchandise, including fashion apparel and home furnishings.

Macy's, Inc. operates department stores in the United States.  The Company also operates direct mail catalog and electronic commerce subsidiaries. Macy's retail stores sell a wide range of merchandise, including men's, women's and children's apparel and accessories, cosmetics, home furnishings and other consumer goods.

Nordstrom, Inc. is a fashion retailer of apparel, shoes, and accessories for men, women, and children.  The Company operates through multiple retail channels, discount stores, boutiques, catalogs, and on the Internet. Nordstrom, Inc. also offers, through a subsidiary, private label card credit and debit cards.

B&M European Value Retail S.A. operates as a general merchandise discount retailer. The Company sells products ranging electronics to home goods.

Canadian Tire Corporation Limited is a family of businesses that includes a retail segment, a financial services division and CT REIT. The Company's retail business provides Canadians with products for life in Canada across its living, playing, fixing, automotive and seasonal categories. Canadian Tire Corporation's  retail products include casual, industrial and active wear.

PT GoTo Gojek Tokopedia Tbk operates as an e-commerce platform. The Company offers mobility, food delivery, logistics, e-commerce, and financial technology solutions. GoTo Gojek Tokopedia serves customers in Indonesia.

Central Retail Corp Ltd operates general merchandise stores. The Company offers electronics, sports, stationery, home improvement, and office products. Central Retail serves customers in Thailand.

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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