Minimax has not yet succeeded in building Miniso's IP

Miniso has just released its first-quarter results, which show seemingly strong profit growth—yet this was largely attributable to substantial net income generated from equity investments.

Key points:

• First-quarter profit nearly tripled year-over-year

• Top Toy revenue rose by more than 50% to RMB 515 million

Author of this article: Liu Zhiheng

Selling lifestyle and trendy toy products,Miniso Group Holding Limited（$MNSO (09896.HK)$;$MINISO (MNSO.US)$) has just delivered a first-quarter performance that truly stands outEarnings Report, with revenue for the first three months rising 28.5% year-over-year to RMB 5.688 billion, and profit performance even more impressive—surging nearly 200% year-over-year to RMB 1.248 billion.

Revenue from Mainland China increased by 29.6%, driven by high single-digit same-store sales growth, while overseas markets also saw a 21.9% revenue increase. Top Toy, the group’s specialty trendy toy retail chain, reported revenue jumping over 50% year-over-year to RMB 515 million.

The group’s progress in expanding its store network has also been remarkable: as of the end of March, it operated 8,565 stores, an increase of 797 compared to a year earlier, including a net addition of 80 stores in the first three months alone. Overseas expansion is increasingly bearing fruit, with 3,617 stores currently operating—an increase of 404 year-over-year and 34 added so far this year.

While results and business operations appear broadly in line with expectations, Group Chairman and CEO Ye Guofu boldly stated: 'Miniso Group’s current valuation does not reflect its true intrinsic potential.'

Despite Ye’s strong confidence, the stock price showed little improvement—plunging 6% the day after the earnings announcement to close at HKD 24.36.

Adjusted profit growth remains limited

Looking deeper into the company’s results, adjusted operating profit—excluding foreign exchange gains and losses—rose only 14.3% year-over-year to RMB 838 million. Adjusted net profit, excluding foreign exchange effects, grew even more modestly by just 8.1% year-over-year to RMB 633 million, far less spectacular than the headline profit figures suggest.

In fact, the sharp surge in first-quarter profits was primarily due to a company Miniso invested in years ago listing in Hong Kong earlier this year, whose share price skyrocketed—generating a RMB 8.75 billion fair value gain for Miniso. That company is none other thanMiniMax（$MINIMAX-W (00100.HK)$), one of this year’s top-performing IPOs. MiniMax, recognized as one of China’s 'Six Little Tigers' in artificial intelligence, saw its share price climb steadily after its January listing, surging fourfold in less than six months—delivering Miniso substantial paper profits without any operational effort.

Additionally, Yonghui Superstores, which Miniso acquired last year, contributed RMB 775 million in earnings to the company in the first quarter. In other words, excluding gains from investment revaluations, core business growth was only modest—showing a noticeable gap compared to the nearly 30% revenue increase during the period.

The divergence between revenue and profit growth was primarily due to a significant rise in expenses during the period. General and administrative expenses reached RMB 297 million, up 22.7% year-over-year, while sales and distribution expenses surged even more sharply, hitting RMB 1.47 billion—an increase of 44% compared to the same period last year.

Top Toy lacks a breakout IP

Top Toy, viewed as the group's second growth engine and highly anticipated by Ye Guofu, filed for a Hong Kong listing last year but unfortunately failed to get off the ground and has been put on hold for now. Although Top Toy’s first-quarter revenue growth was solid, it accounted for less than 10% of the group’s total revenue, indicating it has yet to gain meaningful traction.

In fact,Pop Mart（$POP MART (09992.HK)$) successfully overturned public perceptions of toys. Once considered mere children's playthings, toys today are imbued with emotional value—and at their highest tier, even regarded as works of art—propelling their worth into an entirely new dimension. A Labubu figurine recently sold at auction for RMB 1.08 million; if that isn’t art, what is?

Following Pop Mart’s success, numerous market players have attempted to emulate its model. Recognizing this trend, Ye Guofu, who deeply understands the market, also wanted a share of the opportunity. Thus, in 2020, he launched Top Toy as a new venture in the collectible toy segment, leveraging Miniso’s retail channels, supply chain, and operational expertise to sell licensed IP products in its stores.

After several years, Top Toy still hasn’t created a breakout collectible toy. Its most recognized IP, 'Nommi,' surpassed RMB 200 million in sales last year—but notably, this IP came under Top Toy’s umbrella only after the company acquired a 51% stake in HiTOY in mid-last year.

As for 'YOYO,' launched last year, its sales barely reached RMB 100 million. In contrast, Pop Mart’s THE MONSTERS series—home to Labubu—generated a staggering RMB 14.1 billion in revenue last year, making Top Toy’s proprietary IPs appear significantly less competitive by comparison.

Can only profit through its distribution channels

Compared with Pop Mart, Top Toy’s gross margin last year was only 32%—half that of its rival. Clearly, Top Toy lacks a signature, self-owned breakout IP and remains heavily reliant on licenses from Disney andSanrio（$Sanrio (8136.JP)$) IP licensing, which not only entails substantial royalty payments but also forces competition with other retailers on products based on the same IP, keeping gross margins stagnant.

Therefore, even though Top Toy had already expanded to 355 stores by the first quarter of this year and saw its revenue surge by 50% to over RMB 5 billion, without a breakout proprietary IP of its own, the market still views it merely as a trendy toy retailer that sells other companies’ IPs—earning only channel-based profits rather than creative ones. This limits Top Toy’s potential for explosive profit growth.

The recent speculative frenzy in the trendy toy sector is gradually cooling off; even sector leader Pop Mart trades at a forward P/E ratio of just 14x,Blukoo（$BLOKS (00325.HK)$) around 17x, while Miniso trades at only 12x—valuations that are not expensive. If the upcoming interim results continue to show steady and improving performance, their share prices could rebound.

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