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Summary in seconds

My Hold investment rating for MINISO Group Holding Limit (NYSE: MNSO) remains unchanged from my previous update for the company written on October 25, 2021. In this previous article, I discussed the “new sub-brand of MNSO, TOP TOY” and the pace of “new store openings.

In my current article, I focus my attention on the list proposed by the MINISO group in Hong Kong or HK and the new policy guidelines on blind boxes in mainland China. The dual listing in Hong Kong will help ease market concerns over the forced withdrawal of MNSO from the United States. On the other hand, new regulations and guidelines on the sale of blind boxes in Shanghai, China are not good news for MNSO’s growing TOP TOY business. MNSO also appears to be reasonably priced with a forward P/E multiple in the teen range, so a holding rating for the stock is reasonable.

Hong Kong listing will help MINISO address Chinese ADR delisting issues

MNSO has underperformed the S&P 500 in 2022 so far. for the S&P 500. According to the chart below, MNSO’s stock price actually tracked the S&P 500 quite closely between January 2022 and early March 2022, but there was a divergence that started to mid-March.

MINISO Group share price performance since the beginning of 2022

Stock MINISO Group

Looking for Alpha

Notably, MINISO Group’s share price fell -33% from $9.71 on March 9, 2022 to $6.48 at the close of trading on March 14, 2022. of MNSO action during this period occurred Looking for new Alphas reported that the SEC “named five Chinese companies that may be delisted” due to “not adhering to the Foreign Holding Company Liability Act.” This led to a large sell-off of Chinese ADRs (American Depositary Receipts) that include MNSO, as it was uncertain whether China would change its policy to allow Chinese companies listed in the United States to open their books in the review by US regulatory agencies. But MNSO shares saw a decent rebound around the next month to close at $7.98 as of April 20, 2022, and that’s closely tied to the company’s Hong Kong listing.

MINISO Group announced on March 31, 2022 that it “has filed an application with the Stock Exchange of Hong Kong Limited under a dual primary listing proposal”. There was already media reports published in late 2021 which speculated on the planned listing of MNSO in Hong Kong. In other words, MINISO Group does not just double-list in Hong Kong to guard against the risk of delisting in the United States; the company may also have considered factors such as fundraising (i.e. additional funding channel) and valuations (i.e. possibility of higher valuations in Hong Kong ) to decide on a listing in Hong Kong.

In the worst-case scenario where MNSO is forced to delist its shares in the US, MINISO Group shareholders will at least have the option of converting their US-listed shares into Hong Kong-traded shares assuming that the proposed double listing succeeds.

Pop toys and blind boxes

Moving away from the discussion on the listing status of the MINISO Group, it is relevant to assess the regulatory risks associated with the company’s main growth driver, the new TOP TOY sub-brand.

MNSO’s most recent financial results for the second quarter of fiscal 2022 (YE June) announced on March 3, 2022 give an indication of the growth speed of the company’s TOP TOY brand compared to its historic MINISO brand. . MINISO Group’s sales generated by TOP TOY business increased by +20% QoQ from 109 million RMB in the first quarter of FY2022 to 131 million RMB in the second quarter of FY2022. During in the same period, MNSO’s domestic revenue from its historical MINISO brand increased slightly from RMB1.874 million to RMB1,877 million on a QoQ basis.

The number of TOP TOY stores also jumped +24% QoQ to reach 89 at the end of December 2021, while the company’s number of stores for the MINISO brand in Mainland China increased +4% QoQ to reach 3,168 at the end of the second quarter. FY 2022. It is clear that the new TOP TOY sub-brand is growing faster and has great long-term potential (if comparing the number of TOP TOY stores with MINISO stores).

However, increased regulatory control over the sale of blind boxes in China could be negative for the future prospects of MNSO’s TOP TOY business. Reuters defines blind boxes as “unlabeled packages containing random novelty gifts from retailers”.

A January 13, 2022 press article published in one of China’s state-linked media outlets, Global Times, pointed out that Shanghai has introduced new regulations “to strengthen monitoring of the ‘blind box'”, which came after the Association of Consumers in China “issued a statement criticizing fast food chain operator KFC for “encouraging consumers’ irrational buying behavior by launching a ‘blind box’ with toy collections.” A separate January 15, 2022 press article published by South China Morning Post on the same subject mentioned that children under the age of eight cannot purchase blind boxes, and that a cap of 200 RMB will be imposed on the unit selling price of blind boxes under the draft guidelines for the selling blind boxes in shanghai .

During the company’s first quarter fiscal 2022 earnings call on November 18, 2021, MNSO noted that “TOP TOY has been committed to a multi-category strategy since day one, as we firmly believe that our toys should not be limited to blind boxes and that there should be many other potential categories.” The company’s comments at this Q1 FY2022 earnings briefing are essentially an implicit acknowledgment that blind boxes are still a very important product category for TOP TOY in its current state.

It is very likely that the new policies and guidelines for blind box sales in Shanghai will be extended to other parts of mainland China in the coming time. This could result in lower than expected sales volume and lower than expected profit margins for the TOP TOY business. With these new blind box sales guidelines imposed in the future, retailers will not be able to charge a very high selling price for these blind boxes, and speculative activity involving blind boxes (especially the trading and resale of these blind boxes on the second-hand market) could also ease.


MINISO Group is at a fair valuation justifying a Hold rating. MNSO is currently trading at 18.8 times the consensus on the normalized P/E for the next twelve months according to S&P Capital IQ data, which is reasonable given its consensus revenue CAGR for FY 2022-2024 of +24% and its forecast ROE for FY 2023/2024 of 15%-17%.

Although a listing in Hong Kong is positive for MNSO, it appears to have been priced at a considerable price judging by the rally in the share price over the past month or so. On the other hand, MNSO’s Top Toy business is growing rapidly, but new blind box regulations could be a major headwind. In summary, I have a mixed view of the MINISO group considering these two factors.