Miniso downgraded to hold, price target slashed to $14.91

On Monday, the retail company Miniso, listed on the New York Stock Exchange under the ticker NYSE:MNSO, experienced a change in stock rating and price target. A Jefferies analyst has downgraded the company's rating from Buy to Hold. Accompanying this downgrade is a significant reduction in the price target, now set at $14.91, which marks a 53% decrease from the previous target.

The downgrade by Jefferies was prompted by concerns over Miniso's recent acquisition strategy. The analyst cited the application of a higher equity beta, increased from 1 to 3, as a key factor in the reassessment. This change in the equity beta reflects a heightened perception of risk associated with the company's potential move towards investments that are considered less favorable or premature.

The analyst's statement explained the rationale behind the downgrade: "Although we like Miniso's original business, we lower our rating from Buy to Hold w/ a new PT of USD14.91/share, down 53%, mainly on applying a higher equity beta (from 1 to 3) as we believe the acquisition poses the risk of Miniso branching out to less favorable/premature investments."

This adjustment in Miniso's stock outlook suggests that the firm's valuation could be under pressure over the forthcoming 12 months. The change in the equity beta is a reflection of the analyst's view that the company's recent strategic decisions may lead to increased volatility in its stock performance.

In other recent news, Miniso Group Holding Limited plans to acquire a 29.4% stake in Yonghui Superstores Co., Ltd., a leading retail chain in China, making Miniso the largest single shareholder of Yonghui. The agreement involves several shareholders, including The Dairy Farm Company, Limited, and entities indirectly wholly-owned by JD (NASDAQ:JD).com, Inc. This acquisition, expected to close in the first half of 2025, will be funded through Miniso's internal and external financing, subject to regulatory approvals.

In an unrelated development, Jefferies, a global financial services company, downgraded Miniso's stock rating from Buy to Hold and significantly reduced its price target. This decision was primarily driven by concerns over Miniso's recent acquisition activities, which Jefferies believes could lead to less favorable or premature investments. Despite acknowledging the strengths of Miniso's original business, Jefferies maintains a cautious stance due to potential risks associated with the company's expansion strategy.

These developments are part of Miniso's recent activities and strategic moves, which are expected to influence the company's financial health and stock performance. However, Miniso's CEO, Guofu Ye, remains confident in the growth potential the Yonghui deal offers, anticipating shared resources, enhanced economies of scale, and consumer value creation.

InvestingPro Insights

As Miniso (NYSE:MNSO) faces a rating downgrade and a significant cut in its price target, a glance at the company's financial health and market performance through InvestingPro data can provide additional context for investors. Miniso boasts a strong balance sheet, holding more cash than debt, which is a reassuring sign for investors concerned about the company's recent acquisition strategy. Furthermore, Miniso's commitment to shareholder returns is evident, having raised its dividend for four consecutive years, a trend that supports the company's investment appeal despite the recent stock downgrade.

InvestingPro data highlights Miniso's robust revenue growth, with a 39.43% increase in revenue over the last twelve months as of Q2 2024. The company's P/E ratio stands at a modest 13.24, suggesting that it is trading at a low price relative to near-term earnings growth. Despite the recent price target cut, Miniso's stock has seen a significant return over the last week, with a 9.73% price total return, reflecting potential resilience in investor sentiment.

For those looking to delve deeper, InvestingPro offers a comprehensive list of additional tips, including insights on earnings revisions, industry positioning, and profitability forecasts, which can be found at https://www.investing.com/pro/MNSO. These tips are instrumental in painting a fuller picture of Miniso's financial landscape and market outlook.

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