Short-Term Earnings Under Pressure, but Low Valuation Supports Maintaining Buy
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Short-Term Earnings Under Pressure, but Low Valuation Supports Maintaining Buy
MINISO's first-half revenue slightly exceeded guidance, but adjusted operating profit fell short of expectations; Nomura cuts earnings forecasts and target price to USD18.90, while continuing to see value in its long-term proprietary IP and store upgrade strategies.
- Preliminary 2Q26 revenue rose 16%-18% YoY to CNY5.76bn-CNY5.86bn, broadly in line with market expectations; adjusted operating profit declined 6% YoY to increased 1%, below market expectations.
- 1H26 revenue grew 22%-23% YoY, slightly above the company's 20%-22% guidance; adjusted operating profit increased only 4%-6%, below guidance for high-single-digit growth.
- Higher selling, distribution, and financing costs arising from direct-operated store expansion are the key reasons for near-term earnings pressure.
- FY26-28F revenue forecasts are maintained, but normalized net profit forecasts are cut by 5%-9% to reflect a more cautious view on operating margins.
- The target price is lowered from USD22.90 to USD18.90, with the valuation basis reduced from 17.5x to 15.0x forward 12-month P/E; this implies approximately 60.2% upside.
Report interpretation
Overview
Nomura maintains its "Buy" rating on MINISO. The company's 2Q26 revenue growth was solid, but adjusted operating profit weakened due to rising costs; first-half revenue slightly exceeded guidance, while profit growth fell short of expectations. The report believes the company is at a stage where revenue growth is outpacing profit improvement, and near-term earnings pressure will persist.
Core views
Investment in proprietary IP and upgraded store formats remain long-term drivers of same-store sales growth, but they will also compress margins in 2026. Improved seasonality in the U.S. market may lead to sequential improvement in 2H26 operating margins versus 1H26, but the weak earnings growth trajectory could continue into FY27F. Given the undemanding valuation, Nomura maintains its Buy view.
Analysis framework
The report is based on preliminary 2Q26 results, company guidance, and market consensus expectations, assessing changes in revenue, adjusted operating profit, margins, and direct-operated store expansion costs, and applies a forward 12-month P/E valuation methodology to set the target price.
Methodology notes
The target price is based on 15.0x forward 12-month P/E
Nomura lowers its target valuation multiple from 17.5x to 15.0x, believing this level is consistent with the company's earnings growth trend.
Divergence between revenue growth and profit growth
The report focuses on revenue growth, adjusted operating profit, selling and distribution expenses, financing costs, and operating margin to assess near-term profitability.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- MNSO.USCore covered stock
- Strengths
- Revenue continues to grow at a relatively fast pace, while proprietary IP and upgraded stores are viewed as long-term drivers of same-store growth; current valuation is undemanding.
- Weaknesses
- Rising near-term selling, distribution, financing, and store-opening costs are pressuring operating margins and earnings growth.
- Comparison
- FY26F P/E is 8.6x, while the target price uses 15.0x forward 12-month P/E; the target valuation multiple is below the previous 17.5x.
- Risks
- Slower domestic same-store sales and revenue growth, overseas operating uncertainties, and intensified domestic and overseas competition.
Key data
- 2Q26 RevenueCNY5.76bn-CNY5.86bnUp 16%-18% YoY, broadly in line with Bloomberg consensus of CNY5.80bn.
- 2Q26 Adjusted Operating ProfitCNY772mn-CNY812mnYoY change of -6% to +1%, below Bloomberg consensus of CNY805mn.
- 1H26 RevenueCNY11.5bn-CNY11.6bnUp 22%-23% YoY, slightly above the company's 20%-22% guidance.
- 1H26 Adjusted Operating ProfitCNY1.61bn-CNY1.65bnUp 4%-6% YoY, below the company's guidance for high-single-digit growth.
- FY26F P/E8.6xThe report discloses FY26F EPS of CNY9.97.
- FY26F Adjusted Operating Margin15.7%The new forecast is down 1.2 percentage points from the prior 16.9%.
- Target PriceUSD18.90Lowered from USD22.90, based on 15.0x forward 12-month P/E.
Impact & implications
In the short term, direct-operated expansion, proprietary IP, and store renovations will make it difficult for revenue growth to fully translate into profit growth, and the market may continue to focus on the pace of margin recovery. Over the medium to long term, if proprietary IP operations and upgraded stores deliver stronger same-store sales growth, profitability still has a basis for improvement; the current low valuation is the key support for maintaining the positive rating.
Risks
- Slower same-store sales and revenue growth in the domestic market.
- Uncertainties in overseas business operations.
- Intensifying competition from domestic and overseas competitors.
- Costs related to proprietary IP, store upgrades, and direct-operated store expansion remain higher than expected, delaying margin recovery.
What to watch
- Whether improved seasonality in the U.S. market in 2H26 can drive sequential operating margin recovery.
- The actual contribution of proprietary IP and upgraded stores to same-store sales growth.
- Control of selling, distribution, and financing costs related to direct-operated store expansion.
- Whether FY27F earnings growth improves and margins align with the reduced forecasts.
- Domestic same-store sales trends, overseas expansion progress, and changes in the competitive environment.