MINISO 1Q26 revenue remains strong but margins continue to face pressure; Deutsche Bank maintains Buy

Overview

This report is Deutsche Bank's update on Miniso's 1Q26 results and its 2026-2028 earnings forecasts. The report believes the company delivered strong top-line performance, with 1Q26 revenue up 28.5% YoY. Global market SSSG recovered, the China market was supported by the IP strategy, store renovations, and member sales, and overseas markets including Latin America, Europe, Indonesia, and the United States also improved. However, profitability remains under pressure, with gross margin, adjusted operating margin, and net margin all dragged down by business mix, price adjustments, costs from overseas self-operated expansion, marketing spending, logistics expenses, and FX impact.

Core views

The core view is that the quality of revenue growth remains strong, but margin recovery will take time. Deutsche Bank maintains a Buy rating, believing the share price pullback offers attractiveness in a China consumer stock with double-digit growth; at the same time, it fine-tuned its 2026-2028 EPS forecasts by -6.2%, -1.2%, and +0.7%, respectively, and forecasts adjusted net profit of RMB 3.0bn, RMB 3.6bn, and RMB 4.0bn for 2026-2028.

Analysis framework

The report combines actual 1Q26 results, management guidance for 1H26 and the full year, regional SSSG trends, net store opening plans, changes in brand and channel mix, FX impact, and changes in expense items to forecast earnings for 2Q26, 1H26, and 2026-2028, and uses DCF to derive the target price while also referencing 2026E P/E valuation multiples.

Methodology notes

• valuation methodDCF

  discounted cash flow target price

  The report states that the DCF-derived target price is HK$41 and US$21, corresponding to 15x 2026E P/E, and uses this to assess the attractiveness of the current share price relative to long-term cash flow value.

• relative valuationP/E

  2026E price-to-earnings ratio

  The report points out that the current share price implies about 9x to 9.7x 2026E P/E, while the target price corresponds to 15x 2026E P/E, serving as the main reference for judging valuation attractiveness.

• operational trackingSSSG

  same-store sales growth

  The report uses SSSG trends in markets such as China, the United States, Latin America, Europe, and Indonesia to assess revenue growth momentum, and emphasizes the 1H26 targets of MSD SSSG in China and HSD to low double-digit growth in the United States.

• profit quality adjustmentadjusted profit excluding FX impact

  foreign exchange impact adjustment

  As FX impact has become more significant starting in 2026, the report also presents adjusted operating margin and adjusted net profit excluding FX impact to distinguish operating performance from currency-related noise.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• MNSO.N / MINISO GROUP HOLDING LTD

  Report subject; a U.S.-listed China consumer retail company covered by Deutsche Bank.

  Strengths

  Strong 1Q26 revenue growth, recovering global SSSG, and support from the IP strategy, store refurbishment, and member sales in China; TOP TOY revenue grew 51.4% YoY, and multiple overseas markets improved.

  Weaknesses

  Gross margin and operating margin are under pressure, with a higher share of lower-margin revenue in China, price adjustments, costs from overseas self-operated expansion, marketing spending, and logistics costs affecting earnings elasticity.

  Comparison

  The report says the current valuation is about 9x to 9.7x 2026E P/E, below the 15x 2026E P/E implied by the DCF target price; overseas self-operated stores have GPM of about 55%, above the roughly 40% level for China franchise and overseas franchise stores, but self-operated expansion brings cost pressure.

  Risks

  Continued margin compression, greater FX impact, weaker-than-expected execution in overseas expansion, a soft China consumer environment, and store upgrade and pricing strategies delivering below expectations.

Key data

• ratingBuyDeutsche Bank maintains its Buy rating on Miniso.
• target priceHK$41 / US$21DCF-derived target price, corresponding to 15x 2026E P/E.
• 1Q26 revenue growth+28.5% YoY2% above Bloomberg consensus and also above prior guidance of 25% YoY growth.
• 1Q26 gross margin43.4%Down 0.9ppt YoY, affected by a higher mix of lower-margin business in China and price adjustments.
• 1Q26 adjusted operating profit+2.8% YoYGrowth was significantly below revenue growth; adjusted OPM was 13.3%, down 3.3ppts YoY.
• 1Q26 adjusted OPM excluding FX14.7%Down 1.9ppts YoY, showing less margin pressure than the unadjusted basis including FX.
• 1Q26 adjusted net profit excluding FXRMB 633.1mnUp 8.1% YoY and 12% above Bloomberg consensus.
• 1Q26 reported net profitRMB 1,250.7mnSignificantly above RMB 416mn in 1Q25, mainly due to a one-off investment gain of RMB 874.6mn from an AI company and RMB 77mn of investment income from Yonghui.
• 2Q26 forecastrevenue +16% YoY; adjusted operating profit +4.7% YoYExcluding FX impact, 2Q26 adjusted operating profit is expected to grow 9%.
• 1H26 forecastrevenue +22% YoY; adjusted operating profit +4% YoYExcluding FX impact, 1H26 adjusted operating profit is expected to grow 11%.
• 1H26 revenue guidance+20% to +22% YoYFull-year group revenue growth guidance remains at high double digits.
• full-year net store opening target450 to 550 storesLowered from the previous 510 to 550 stores, mainly because the China market is shifting toward larger, better-quality locations while closing smaller inefficient stores.
• 2026-2028 adjusted net profit forecastRMB 3.0bn / RMB 3.6bn / RMB 4.0bnCorresponding to YoY growth of 4.1%, 19.6%, and 11.7%.
• 2025-2028E CAGRrevenue 14%; adjusted net profit 12%Deutsche Bank expects mid-term revenue and profit to maintain double-digit compound growth.

Impact & implications

In terms of investment implications, the report positions Miniso as a China consumer stock with still-strong revenue growth and renewed attractiveness after its valuation pullback, but the market's near-term focus will be on declining gross margin, expense investment, FX noise, and the drag from overseas self-operated expansion on margins. If China store upgrades, the IP strategy, and improving overseas SSSG can continue, while the pressure from price adjustments on gross margin remains manageable, the scope for valuation recovery will become clearer; otherwise, if margins continue to come in below expectations, revenue growth may struggle to fully translate into earnings growth.

Risks

• Gross margin continues to decline due to a higher mix of lower-margin business in China and price adjustments.
• Expansion of overseas self-operated stores brings pressure from selling, marketing, logistics, and operating expenses.
• FX impact has become more significant starting in 2026 and may disturb adjusted profit and net margin performance.
• Weak macro consumer conditions in China may pressure SSSG and store productivity.
• The reduced net store opening plan shows the company is placing more emphasis on quality; if store closures or upgrades do not proceed smoothly, revenue growth may come in below expectations.
• One-off investment gains boosted reported net profit and may mask pressure on recurring earnings.

What to watch

• Whether 2Q26 gross margin continues to contract by a similar magnitude as management expects.
• Whether the China MSD SSSG target and the U.S. HSD to low double-digit growth target can be achieved.
• Whether SSSG improvement in Latin America, Europe, Indonesia, and the United States can be sustained.
• Whether store productivity and member sales contribution improve after China stores are upgraded to larger, higher-quality locations.
• Whether costs from overseas self-operated expansion continue to weigh on adjusted OPM.
• Whether TOP TOY can sustain high growth in net store openings and revenue growth.
• Whether the profit gap before and after excluding FX widens further.