MINISO Group Holding will soar with a revenue surge of 17.1%

MINISO Investment Thesis

This analysis is based on the MINISO 2024 Q4 and 2025 Q1 earnings call presentations and the provided transcript.

# Catalysts

MINISO has several key growth drivers that could meaningfully impact sales and earnings:

• Global Store Network Expansion: The primary catalyst is the aggressive and ongoing expansion of its store network, both in China and, more significantly, in overseas markets. In the first quarter of the 2025 fiscal year, MINISO opened 125 new stores, with 88 of those in overseas markets. Management has a clear goal of maintaining a net increase of 900 to 1,100 stores globally for the calendar year 2024, indicating a strong and sustained expansion pipeline. This physical expansion is the most direct driver of top-line revenue growth.
• "Super Store" Strategy: MINISO is focusing on opening larger "super stores" (over 200 square meters) in prime, high-traffic locations globally. These stores generate significantly higher revenue than regular stores (2-3 times the average GMV in China, and 3-5 times overseas). This strategy not only boosts revenue per store but also enhances brand image and visibility, creating a virtuous cycle.
• IP Collaborations and Product Innovation: MINISO's strategy of co-branding with well-known IP holders (like Sanrio, Barbie, and Peanuts) is a powerful differentiator. These collections create a "wow" factor, drive foot traffic, and command higher price points, which improves gross margins. The company is continuously launching new products and categories, with a focus on "interest-based consumption," particularly in fragrance, electronics, and toys, to capture a larger share of the consumer's wallet.
• TOP TOY Brand Growth: While still a smaller part of the business, TOP TOY is a significant growth catalyst. It taps into the high-growth "art toy" or "designer toy" market. TOP TOY's revenue grew by over 57% year-over-year in the first quarter of fiscal 2025. Its expansion and growing popularity represent a material opportunity for diversification and high-margin growth for the group.

MINISO is well-positioned to benefit from several key industry tailwinds:

• Global Demand for Value and Aesthetics: In the current global economic climate, consumers are increasingly seeking value for money. MINISO's core value proposition of offering well-designed, high-quality, and affordable lifestyle products directly meets this need. This trend is prevalent in both developing and developed markets.
• Rise of Interest-Driven Consumption: Consumers, especially younger demographics, are moving beyond basic needs and spending more on products that align with their hobbies, interests, and identities. MINISO's focus on IP collaborations and aesthetically pleasing products caters directly to this "interest-driven" trend, turning shopping into a form of entertainment and self-expression.
• Growth of Offline Retail Experiences: Despite the rise of e-commerce, there is a renewed appreciation for engaging physical retail experiences. MINISO's bright, well-organized stores and treasure-hunt-like atmosphere provide a compelling offline experience that online shopping cannot replicate, driving consistent foot traffic.

# Assumptions

Based on the company's stated strategy and growth trajectory, it's reasonable to assume significant revenue growth over the next five years. A projection can be built on three pillars:

1. Store Network Growth: Management targets 900-1,100 new stores in 2024 alone. Assuming a conservative, slightly moderating pace of ~800 net new stores per year for the next five years, they could add ~4,000 stores to their network, reaching nearly 10,000 stores globally. The majority of this growth will be in higher-revenue overseas markets.
2. Same-Store Sales Growth (SSSG): The "Super Store" strategy, continuous product innovation, and IP collaborations are designed to increase sales per store. Assuming a modest SSSG of 3-5% annually (blended between China and overseas) is achievable as the brand matures and store formats are optimized.
3. Overseas Contribution: Overseas revenue is growing much faster (38% YoY in Q1 FY25) than in China and already accounts for over a third of total revenue. This mix shift will be a powerful tailwind for overall revenue growth, as overseas stores have higher average sales.

Given these factors, it would not be unreasonable to see revenue more than double in the next five years, potentially reaching the RMB 25-30 billion range, driven primarily by the compounding effect of overseas store expansion and enhanced store productivity.

Earnings are likely to grow at an even faster rate than revenue over the next five years due to operating leverage and margin expansion.

• Gross Margin Improvement: The company's gross margin has shown significant improvement, reaching 42.8% in the latest quarter. This is driven by a higher mix of overseas sales (which have higher margins), an increasing proportion of direct-to-consumer (DTC) sales, and the success of higher-margin IP products. This trend is expected to continue, with gross margins potentially stabilizing in the low-to-mid 40s.
• Operating Leverage: As the company scales, corporate overhead, marketing, and G&A expenses should grow slower than revenue. This operating leverage will allow a greater portion of gross profit to fall to the bottom line. While investments in the "Super Store" strategy and brand building will require upfront costs, these should pay off in efficiency over the long term.

Assuming revenue doubles and the adjusted net margin expands from its current ~16-17% level to around 20% due to these factors, adjusted net earnings could potentially triple over the next five years.

# Risks

There are execution risks tied directly to the catalysts:

• Store Expansion Execution: The aggressive global store opening plan is complex. Failure to secure prime locations, manage supply chains effectively across dozens of countries, or properly train local partners could lead to underperforming stores and slower-than-expected growth.
• IP Strategy Risk: The success of IP collaborations depends on identifying and securing popular IPs. A failure to predict trends or a "bad bet" on a particular IP could lead to excess inventory and margin pressure. There is also a risk of over-reliance on a few key IP partners like Sanrio.
• "Super Store" Performance: The higher rent and operational costs of "Super Stores" require them to generate significantly higher sales to be profitable. If these stores fail to deliver the expected 3-5x revenue uplift, it could negatively impact overall profitability.

• Geopolitical and Regulatory Risks: As a Chinese company with a rapidly growing global footprint, MINISO is exposed to geopolitical tensions, tariffs, and varying regulations in different countries. A negative shift in sentiment towards Chinese brands or the imposition of trade barriers in key markets (like the US or Europe) could severely hinder its overseas growth story.
• Intensifying Competition: MINISO operates in a competitive space. It faces competition from other value retailers (like Dollar General in the US), lifestyle brands (like Flying Tiger), fast-fashion players who are expanding into lifestyle products (like Zara Home), and countless online marketplaces (like Temu and Shein) that compete aggressively on price. If competitors successfully replicate its model of "affordable aesthetics," it could erode MINISO's market share and pricing power.
• Shifting Consumer Preferences: The company's success is tied to its ability to stay on top of trends. A failure to adapt to rapidly changing consumer tastes in fashion, design, or "interest" categories could make the brand feel dated and irrelevant, impacting sales.

# Valuation

• In 3 Years: MINISO will likely be a significantly larger company, with a store count approaching 8,000. Overseas revenue should constitute close to 50% of the total. The brand will be more established in key markets like North America and Europe, and the "Super Store" concept will be a proven, core part of its strategy.
• In 5 Years: The business could have a network of ~10,000 stores, making it a truly global retail giant in its niche. It will have a much more diversified revenue base geographically. TOP TOY could be a much more meaningful contributor to the bottom line. The key challenge will be shifting from a hyper-growth phase to one of sustained, profitable growth.
• In 10 Years: The business will be mature. Growth will likely have slowed to a more modest pace. The company's success will depend on its ability to have become an enduring global brand, continually refreshing its product offerings and maintaining its operational excellence and supply chain advantages. It may have expanded into new brand concepts beyond MINISO and TOP TOY.

• Revenue Margins (Gross Margin): The gross margin has expanded significantly to over 40%. As the higher-margin overseas business continues to grow as a percentage of the total, the gross margin could stabilize in the 42% to 45% range over the medium term.
• Profit Margins (Adjusted Net Margin): Currently around 16-17%, the adjusted net margin has room for expansion due to operating leverage. As the business scales, it's conceivable that the adjusted net margin could expand towards the 18% to 20% range over the next 3-5 years, assuming successful execution of the growth strategy.

The future valuation multiple (e.g., Price-to-Earnings ratio) will depend entirely on the execution of the strategy and the market's perception of its long-term growth.

• Scenario for Multiple Expansion/Maintenance: If MINISO successfully executes its global expansion, maintains strong same-store sales growth, and continues to expand margins, it could command a premium valuation multiple, typical of a high-growth global consumer brand. The market would be rewarding the company for its large addressable market and proven, profitable growth model.
• Scenario for Multiple Contraction: Conversely, if growth slows significantly, if margin expansion stalls, or if it runs into major execution issues overseas, the market will re-rate the stock downwards. The multiple would contract to reflect a more mature, slower-growing business with higher perceived risks.

The key determinant will be the durability of its overseas growth. As long as the company can demonstrate a long runway for profitable expansion outside of China, its valuation multiple is likely to remain elevated compared to traditional retailers.