Asia Pacific Equity Research 22 August 2025 Miniso - H / ADR 2Q SSSG and margin improving QoQ; fundamental turnround to continue in 2H25 and 2026, driving valuation re-rating Miniso's 2Q25 sales/adjusted OP were up 23%/8.5% yoy (vs 19%/-5% in 1Q25), ahead of guidance and consensus estimates. The better-than-expected 2Q turnaround came from: 1) China SSSG turned positive and the overseas SSSG decline narrowed; 2) China net openings turned positive; and 3) the group OP margin contraction narrowed on overseas ...

Investment Rating - The report rates several companies as "Buy," including Yili, Shanxi Fen Wine, Ninebot, Midea, YUTO, and Huali [5][9]. Core Insights - The report highlights a divergence in performance between 'new consumption' stocks, which are experiencing strong growth, and 'traditional consumption' stocks, which are underperforming due to their reliance on macroeconomic conditions and stimulus policies [2][30]. - Key investment themes for 2H25 include structural opportunities and high earnings growth in new consumption trends, market share gains in traditional sectors, and high dividend yields from established consumer leaders [3][10]. Summary by Sections 1. Market Overview - The report notes slower-than-expected implementation of consumption stimulus policies in 1H25, impacting sectors like home appliances and baijiu [2][18]. - The divergence in stock performance is attributed to the macro recovery lacking visibility, with new consumption stocks benefiting from structural opportunities [30][31]. 2. Investment Themes - Structural opportunities and high earnings growth are expected in areas such as smart home products, mass snacks, beauty, and pet care [3][10]. - Market share gains are anticipated in traditional consumer sectors, particularly through consolidation and domestic substitution [3][10]. - High dividend stocks, particularly in baijiu, dairy, and white goods, are highlighted as attractive due to strong cash flows and supportive policies [3][10]. 3. Sector Preferences - The report adjusts sector preferences, ranking dairy products highest, followed by soft drinks, beer, and cosmetics [4]. - It emphasizes the potential for market share consolidation in the e2W sector amid stricter regulations [4]. 4. Stock Picks - Specific stock picks include Yili Industrial, Shanxi Fen Wine, Ninebot, Midea, YUTO, and Huali, all rated as "Buy" due to their strong fundamentals and growth prospects [5][9][11][12][13][14]. 5. Consumer Trends - The report identifies Gen Z as a significant driver of new consumption trends, focusing on emotional and experience-based consumption [38][39][40]. - It notes that Gen Z's preferences are reshaping the consumer market, leading to increased demand for local and trendy brands [39][40].

Investment Rating - The report maintains a consistent sector preference, favoring sports brands, diversified retailers, dairy, beverages, and restaurants, while being less favorable towards apparel/footwear OEM, furniture, projectors, discretionary small kitchen appliances, jewelry, and non-super-premium spirits [11]. Core Insights - Consumption in China has shown signs of recovery, with retail sales growth improving to +4.6% year-over-year in 1Q25, and companies in the coverage reporting an average growth of 14% compared to 12% in 4Q24 [1]. - Despite the positive growth, companies remain cautious about the outlook due to ongoing volatility and external factors such as US-China tariff developments impacting consumer confidence [2][1]. - Margin performance in 1Q25 was mixed, with some companies benefiting from favorable raw material prices and cost control, while others faced risks from marketing investments and competition [1]. - Companies are generally maintaining disciplined pricing strategies and healthier inventory levels, although some categories like spirits and sportswear are experiencing challenges due to demand pressures [1]. - The impact of tariffs on earnings and consumer sentiment is significant, with companies cautious about the second half of 2025 amid uncertainties [2]. Summary by Sections Key Findings from 1Q25 Results - Retail sales growth improved to +4.6% year-over-year, with coverage companies reporting an average growth of 14% [1]. - Labor Day consumption growth accelerated, indicating a potential rebound in consumer spending [1]. Expectations for 2Q25 - Companies are cautious about the outlook for 2H25 due to tariff uncertainties, although those with market share gain opportunities may be more resilient [2]. Sector/Stock Preferences - Preferred sectors include sports brands, diversified retailers, dairy, beverages, and restaurants, while least preferred sectors include apparel/footwear OEM and furniture [11]. Macro Data Points - The report notes that macroeconomic data points are solid, but ongoing tariff developments and policy support need to be monitored [11]. Valuation Methodology - The report emphasizes the importance of understanding the valuation methodology and the potential risks associated with it [11].