MINISO Group's Strategic Share Reclamation and the Case for Long-Term Value

MINISO Group, the global lifestyle retailer known for its affordable, design-driven products, has made headlines in June 2025 with a notable move by its chairman and CEO, Guofu Ye. Ye has reacquired 14 million ordinary shares tied to a previously disclosed collar transaction, a move the company frames as a bold vote of confidence in its long-term prospects. This strategic reclamation of shares, coupled with MINISO's robust financial results and undervalued stock price, raises critical questions: How does this action influence investor sentiment? And what does it mean for the stock's valuation?

The Collar Transaction Unwind: A Signal of Leadership Confidence

The collar transaction, initiated in 2023, involved transferring 14 million shares to a financial institution as collateral for a prepaid forward contract. This type of arrangement is common for executives seeking liquidity without immediate dilution. The recent unwind—where all shares were returned to Ye's entity, Mini Investments SP1 Limited—eliminates the risk of forced sales and signals Ye's renewed commitment to the company's future. For shareholders, this removes a potential overhang, as the shares are no longer at risk of being sold to settle the forward contract.

While the unwinding itself may not directly impact valuation metrics like revenue or margins, it sends a clear message: Ye, who owns roughly 60% of MINISO's shares, is doubling down on his investment. This contrasts with executives who exit positions during uncertainty, reinforcing investor trust in leadership's vision.

Financial Resilience Amid Near-Term Challenges

MINISO's Q1 2025 results highlight a classic case of strong top-line growth paired with margin pressures. Revenue rose 18.9% year-over-year to RMB4.43 billion, driven by a 30% surge in overseas revenue, now contributing 39% of total MINISO brand sales. Overseas expansion—particularly in Mexico, the U.S., and Southeast Asia—is a key growth lever, with store counts hitting 7,780 globally (including 3,000 outside China) by late 2024.

However, net profit fell 28% to RMB416 million, primarily due to rising expenses. Selling and administrative costs jumped 45%, reflecting investments in store upgrades and IP partnerships (e.g., Disney, Studio Ghibli). Financial costs, tied to convertible bonds and bank loans, also weighed on margins. The stock price dropped 17.5% post-earnings, hitting $18.29—a reaction to short-term profit concerns.

Why Analysts See a 45% Undervaluation

Despite the profit miss, analysts argue MINISO is trading at a steep discount to its intrinsic value. A discounted cash flow (DCF) model by GuruFocus estimates a fair value of HK$52.00 (US$6.70) per share—45% above its recent price of around $18.29. This valuation hinges on assumptions of 18% annual revenue growth, a 12% discount rate, and a conservative 10x terminal EBITDA multiple.

The bull case rests on MINISO's fortress-like balance sheet (RMB7.26 billion in cash) and disciplined capital returns: RMB260 million in buybacks and RMB740 million in dividends in 2024. Additionally, operational metrics like a 44.2% gross margin (up from 40.5% in 2023) and 27% efficiency gains in new store formats suggest margin stabilization.

Risks and Considerations

Bearish arguments center on domestic challenges: Same-store sales in China dipped mid-single digits in Q1, though the company notes improvement in Q2. Rising debt costs from convertible bonds and bank loans could also pressure profitability. A U.S. inventory buildup—part of aggressive expansion—adds to near-term risks.

The Investment Case: Buy the Dip, Play the Long Game

The collar unwind and financial results paint a nuanced picture: MINISO is undeniably navigating short-term headwinds, but its global expansion, IP-driven margins, and cash-rich balance sheet argue for long-term resilience. At its current price, the stock offers a compelling entry point for investors willing to overlook near-term volatility.

Historical performance supports this approach. A backtest analyzing the strategy of buying MINISO shares on the announcement date of quarterly earnings releases and holding for 30 trading days from 2020 to June 2025 demonstrated compelling results. The strategy achieved a compound annual growth rate (CAGR) of 14.28%, with an excess return of 9.28%, though investors should note a maximum drawdown of 25.48% during this period. This underscores the potential reward in aligning investments with earnings catalysts, even as it highlights the need for risk management.

Key catalysts ahead include:
1. Q2 2025 updates: Improved same-store sales in China and continued overseas momentum could stabilize sentiment.
2. Share buybacks: The RMB260 million program (extended to June 2026) reduces float and signals confidence.
3. Valuation re-rating: A closing of the 45% discount to fair value would require investors to focus on MINISO's scalable model and leadership in affordable retail.

Conclusion

MINISO Group's unwinding of its collar transaction is more than a technical maneuver—it's a leadership statement that aligns with the company's financial and strategic strengths. While near-term profit pressures are valid concerns, the stock's valuation discount and Ye's continued stake suggest an asymmetric opportunity. For investors with a multi-year horizon, MINISO offers a rare blend of global growth, defensive cash flows, and upside potential.

Investment recommendation: Consider accumulating MINISO shares at current levels, with a target price of US$23.47 (consensus) to US$32.40 (bullish estimates). Monitor for signs of margin stabilization and U.S. store performance.

Data as of June 19, 2025. Past performance is not indicative of future results.