MINISO Group (9896.HK)_ Citi-hosted CFO group call takeaways; Outlooks for 4Q24E and 25E

Summary of MINISO Group (9896.HK) Conference Call Company Overview - Company: MINISO Group (9896.HK) - Market Cap: HK$48,618 million (US$6,247 million) - Current Price: HK$38.70 - Target Price: HK$52.20 - Expected Share Price Return: 34.9% - Expected Dividend Yield: 2.6% - Expected Total Return: 37.4% [1] Industry Insights - Industry: Retail, specifically in the discount variety store segment - Market Outlook: Strong overseas market outlook for 4Q24 and 2025, supporting full-year guidance of 20-30% YoY sales growth and adjusted net profit (NP) of Rmb2.8 billion [1][2] Key Points from the Conference Call 4Q24 and 2025 Outlook - Revenue Growth: Management expects group revenue to grow 25-30% YoY in 4Q24, with overseas sales anticipated to grow 45-50% YoY [2] - Store Expansion: Plans to add 200-250 overseas points of sale (POS) in 4Q24, totaling approximately 700 POS for the full year [2] - China Sales: Anticipated low-teens YoY growth in China sales, with 76 new stores expected in 4Q24 [2] Growth Drivers for 2025 - Sales Acceleration: Expected acceleration in overseas YoY sales growth in 2025 due to same-store sales growth (SSSG) and store expansion [3] - Gross Profit Margin (GPM): Anticipated YoY GPM expansion in 2025, driven by increased sales from overseas markets and intellectual property (IP) products [3] - Operating Expenses: Expected decrease in operating expenses to sales ratio in 2025, particularly for US direct retail stores [3] US Business Performance - Unit Economics: GPM for US direct retail operations is approximately 80%, with store-level EBIT margin in the low-20s% [4] - Tax Credits: Management expects to benefit from carry-forward tax credits due to historical accounting losses since 2017 [4] - Margin Improvement: Anticipated improvement in US EBIT margin in 2025 due to streamlined labor costs and optimized expenses [4] China Operations - Sales Growth: China sales grew 6% YoY in 3Q24, with a decline in traffic and mild average selling price (ASP) increase [5][7] - SSSG Performance: Better SSSG in Tier 1-2 cities compared to lower-tier cities, with a focus on increasing IP product sales in higher-tier cities [7] Risk Factors - Competition: Fierce industry competition poses a risk to growth [12][15] - Global Expansion: Weaker-than-expected global expansion could impact performance [12][15] - Macroeconomic Environment: Uncertain macro environment and shifts in consumer preferences are potential risks [12][15] - Management of Distributors: Weaker-than-anticipated management of distributors and retail partners could affect operations [12][15] Tariff Mitigation Strategies - Product Sourcing: Approximately 70% of products sold in the US are produced in China, with plans to source 50% from Southeast Asia, Japan, Korea, and the US if tariffs increase [8] Conclusion - MINISO Group is positioned for strong growth in both domestic and international markets, with a focus on expanding its store footprint and enhancing profitability through operational efficiencies. However, the company faces several risks, including competitive pressures and macroeconomic uncertainties. The outlook for 2025 appears optimistic, with expected acceleration in sales growth and margin improvements.