GTHT has released a research report adjusting MINISO Group Holding Limited's (09896) 2025-27 adjusted net profit forecasts to RMB 2.998/3.474/4.179 billion (-0.24/-0.68/-0.01 billion), citing ongoing investments in overseas self-operated stores. Despite this, the firm maintains a positive outlook due to sequential improvements in domestic and international operations, rapid growth from TOPTOY, and strategic upgrades in large stores, IP collaborations, and overseas expansion.

GTHT assigns an 18x PE valuation for 2026, translating to a target market cap of RMB 62.5 billion. At an exchange rate of 1 HKD = 0.9100 CNY, the target price is revised to HK$55.50 with a "Buy" rating. Key highlights from the report include:

**Performance Overview**: - Q3 revenue reached RMB 5.797 billion (+28.2% YoY), with domestic sales up 19.3%, international business growing 27.7%, and TOPTOY surging 111.5%. - Net profit attributable to shareholders fell 31.4% to RMB 441 million, while adjusted net profit rose 11.7% to RMB 767 million. Adjusted EBITDA increased 18.8% to RMB 1.354 billion.

**Operational Improvements**: 1. Revenue slightly exceeded expectations, with domestic growth at 19.3% (vs. mid-to-high teens forecast) and single-store sales up 10% (vs. high single-digit estimate). Overseas single-store revenue rose 7.9%, aligning with the company's low single-digit guidance. 2. Net store additions totaled 233 in Q3 (domestic +102, overseas +117, TOPTOY +14), bringing the total to 8,138 stores (domestic 4,407, overseas 3,424, TOPTOY 307). 3. Store expansion accelerated sequentially, reflecting successful adjustments in store formats and product categories.

**Strategic Investments and Margins**: - Q3 gross margin dipped slightly to 44.7% (-0.2 ppts YoY, +0.4 ppts QoQ). Rising sales expenses, driven by overseas self-operated store investments, temporarily pressured profitability. - Efficiency gains are evident, with sales expense ratios narrowing from +4.8 ppts in Q1 to +1.4 ppts in Q3. - Accelerated store openings amid improving same-store sales signal a positive cycle for domestic operations, likely boosting valuations.

**Outlook**: Overseas revenue growth remains robust, with North American same-store sales showing sequential improvement. The upcoming holiday season offers further upside for operational and earnings growth.

**Risks**: Potential setbacks in domestic product mix/store adjustments and overseas trade policy impacts on costs/logistics.

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