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On Monday, Jefferies, a global financial services company, downgraded the stock rating for Miniso (H-Shares) (9896:HK) (NYSE: MNSO), a well-known retail company, from Buy to Hold. The firm also significantly reduced Miniso's price target to HK$29.10 from the previous HK$61.90. This adjustment reflects a 53% decrease in the stock's price target, now equivalent to approximately $14.91 per share.
The downgrade was primarily attributed to Jefferies' reassessment of the company's risk profile, opting to apply a higher equity beta of 3, up from the previous beta of 1. The analyst's concerns center around Miniso's recent acquisition activities, which are believed to potentially lead the company into less favorable or premature investments.
According to Jefferies, these strategic moves by Miniso could put the company's valuation under pressure over the next 12 months. The firm's cautionary stance suggests that the acquisitions may divert Miniso from its original successful business model, thereby affecting its financial health and stock performance.
Despite the downgrade, Jefferies acknowledged the strengths of Miniso's original business. However, the potential risks associated with the company's expansion strategy into new investment areas seem to have outweighed the positives in their analysis.
In other recent news, global value retailer MINISO Group Holding Limited has announced plans to acquire a 29.4% stake in Yonghui Superstores Co., Ltd., a leading retail chain in China. This transaction, valued at approximately RMB6.3 billion, will make MINISO the largest single shareholder of Yonghui, a company known for its strong sales in the supermarket sector. The share purchase agreements involve several shareholders, including The Dairy Farm Company, Limited, and entities indirectly wholly-owned by JD (NASDAQ:JD).com, Inc.
The acquisition, expected to close in the first half of 2025, is set to be funded through MINISO's internal financial resources and external financing, subject to regulatory approvals. CEO of MINISO, Guofu Ye, has expressed confidence in the growth potential this deal offers, anticipating shared resources, enhanced economies of scale, and consumer value creation.
InvestingPro Insights
In light of Jefferies' recent downgrade of Miniso, a review of the latest InvestingPro data and tips reveals a nuanced picture of the company's financial standing. With a market capitalization of $4.25 billion and a robust revenue growth of 39.43% over the last twelve months as of Q2 2024, Miniso demonstrates significant market presence and growth potential.
Furthermore, InvestingPro Tips highlight that Miniso holds more cash than debt on its balance sheet and has managed to raise its dividend for 4 consecutive years, signaling a strong financial position and a commitment to shareholder returns. Despite recent price volatility, analysts predict that the company will be profitable this year, with profitability already demonstrated over the past twelve months.
InvestingPro also notes that Miniso is trading at a low P/E ratio relative to near-term earnings growth, which could indicate an attractive valuation for investors considering the company's earnings prospects. Additionally, with a dividend yield of 3.21% and a significant return over the last week, Miniso presents an interesting opportunity for dividend investors and those looking for short-term gains.
While the company's stock performance has seen a decline over the last three months, the InvestingPro product, which includes additional tips, provides further insights into Miniso's financial health and market position. With a total of 12 additional tips available on InvestingPro, investors can gain a comprehensive understanding of Miniso's investment potential.
Overall, while Jefferies' downgrade reflects concerns about Miniso's strategic direction, the InvestingPro data suggests strong financial fundamentals that may support the company's ability to navigate its expansion strategy successfully.
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