Citi has downgraded MINISO Group Holding Limited (09896.HK) to a "Neutral" rating from "Buy" following a first-half earnings miss, cutting the Hong Kong-listed shares' target price by more than half from HK$45.7 to HK$22.2. The US-listed American depositary receipts also saw their price objective slashed to US$11.3 from US$23.4, reflecting a similar over-50% reduction.

The company's first-half performance fell short of expectations despite the topline showing some resilience. Revenue rose 22.4% year-on-year to RMB 11.5 billion, slightly above the guided 20%-22% range, with strength primarily driven by the domestic business. However, on an adjusted operating profit basis and excluding currency fluctuations, growth slowed to just 5%, trailing the high single-digit expansion previously projected. Adjusted net profit even declined 2% year-on-year, underscoring the profitability pressure.

Citi noted that management has adopted a more cautious stance on the overseas and TOP TOY business segments, leading to a broad downward revision across key guidance metrics for the full year. Revenue growth is now projected in the mid-teens percentage range, down from the high-teens. The net store opening target has been drastically curtailed from 450-500 new locations to a range of just 130-160, with overseas distributor stores expected to see net closures of 100-110 in the second half. The adjusted net profit forecast has flipped from approximately 7% growth to a high single-digit decline, while the adjusted net profit margin contraction is now anticipated to deepen to between 3 and 4 percentage points, widening from the earlier 1-2 point estimate.

Based on these revised assumptions, Citi has reduced its adjusted earnings projections for 2026 through 2028 by a substantial 23% to 27%.

The bank attributes the downgrade and target price cut primarily to the insufficient short-term growth momentum in the overseas and TOP TOY operations, signalling caution over the company's near-term recovery in the global retail expansion strategy.