With Yonghui in the left hand and TOP TOY in the right hand, the capital map of Miniso is being restructured

Miniso (9896.HK) is expected to give birth to a new listed company under its umbrella.

Recently, Bloomberg reported that Miniso is considering spinning off its trendy toy brand TOP TOY for an IPO, aiming to raise $300 million.

Xinfeng (ID: TradeWind01) sought confirmation from sources close to Miniso regarding the above information, but the other party declined to comment.

TOP TOY is a trendy toy brand incubated internally by Miniso.

On the day of its first financial report after going public in December 2020, Miniso officially announced the brand.

From the perspective of its founding time, at that moment, Pop Mart (9992.HK) had just successfully listed on the Hong Kong Stock Exchange, and the trendy toy craze was spreading nationwide in the form of blind boxes.

Backed by Miniso, TOP TOY has channel and IP advantages, and with its high-end positioning, it once carried the market's expectations for Miniso's second growth curve.

Miniso Group founder Ye Guofu stated at the 2022 listing communication meeting that he is very optimistic about the trendy toy sector and hopes to achieve a separate listing for TOP TOY within three years.

In 2025, the success of "Ne Zha 2" and the popularity of the "Guzi Economy" made the market once again feel the potential of emotional consumption among young people.

Pop Mart's market value returned to its peak, and Blok (0325.HK) landed on the Hong Kong stock market, shifting the narrative of trendy toys from the addictive nature of blind box consumption to the vast space of IP derivatives.

However, for Miniso, as its overseas footprint takes shape and brand positioning is reshaped, the importance of TOP TOY has diminished.

In the first three quarters of 2024, the contribution of the TOP TOY brand to the company's overall revenue was only 5.7%.

The spin-off of TOP TOY also signifies a reduction in expenditure pressure for Miniso at this time.

Miniso has been quite active in capital movements recently: acquiring Yonghui, issuing convertible bonds, and the news of the TOP TOY spin-off emerged within about six months. What these series of actions will bring to the "Miniso system" companies is something the market is eagerly anticipating.

TOP TOY's "Spin-off Revaluation"

TOP TOY is currently in a period of rapid performance expansion.

In 2023, the annual revenue was approximately 680 million yuan, a year-on-year increase of 58.5%; in the first three quarters of 2024, revenue reached 700 million yuan, a year-on-year increase of 42.5%.

In 2024, TOP TOY's single-store model has basically been validated, enhancing its attractiveness to franchisees.

In the first three quarters of 2024, TOP TOY added a net of 86 stores, bringing the total to 234, exceeding the net store openings for the entire year of 2023. It achieved profitability for four consecutive quarters, with a mid-to-high single-digit increase in gross margin.

The brand previously stated that while continuing to seize the blank market in first- and second-tier cities, it will also expand into lower-tier cities.

Du Bin, Secretary-General of the Brand Professional Committee of the Shanghai Shopping Center Association, told Xinfeng (ID: TradeWind01) that in recent years, the number of new shopping center projects in first- and second-tier cities has decreased, with more focus on old projects being renovated, resulting in fewer locations available for trendy toy store expansion.

"However, formats over 80,000 square meters are still very willing to introduce trendy toy brands, as they can bring traffic to the mall," Du Bin said Unlike Pop Mart, TOP TOY positions itself as a "trendy toy collection store" and does not excel in developing its own IP.

Founder Sun Yuanwen stated in an early interview that TOP TOY's medium to long-term plan adheres to 70% external sourcing and 30% self-incubation.

He likened the difference between Pop Mart and TOP TOY to the differences between the iOS system and the Android system.

Compared to Pop Mart, which builds its business landscape around core IPs, TOP TOY's identity is more akin to a "platform" or distributor, with its core competitiveness stemming from its secondary development and operational capabilities of well-known IPs, as well as supply chain and channel advantages.

This is consistent with the approach of Miniso.

TOP TOY can share resources such as customers, channels, and supply chains from its parent company. In its early establishment, TOP TOY reached cooperation agreements with globally renowned IPs such as Disney, Sanrio, and Marvel.

Currently, TOP TOY has 80 IP licensed brands and has signed core strategic partnerships for Sanrio's IP licensing in all Southeast Asian countries.

In terms of self-developed products, TOP TOY has also chosen the building block category, which still has increasing penetration, and has launched the promotional logo of "Chinese Building Blocks."

Compared to similar competitors, TOP TOY may need to consider how to face the "upward pressure" from Miniso.

In recent years, Miniso has adhered to a "superstore" strategy in China, targeting first-tier cities, core business districts, and prime locations, opening large-format stores.

In January 2025, Miniso opened the MINISO LAND Beijing No. 1 store in collaboration with "Black Myth: Wukong," exclusively selling official derivatives of Black Myth, attracting a large number of players to the venue.

MINISO LAND is regarded by Miniso as the highest-level store format, with a customer unit price more than twice that of ordinary stores.

By 2025, MINISO LAND plans to expand to 30 stores in China.

In addition, Miniso's positioning has been upgraded to "a retailer characterized by IP design."

It plans to increase the contribution of IP product sales from 30% in the first three quarters of last year to over 50% by the end of 2028.

There is a significant gap in customer unit prices between the two brands.

By the end of the first half of 2024, TOP TOY's store customer unit price reached 111.2 yuan, while Miniso's mainland store customer unit price was about 38.5 yuan.

According to financial report data calculated by TradeWind (ID: TradeWind01), TOP TOY's brand GMV per store in the first half of 2024 was approximately 2.226 million yuan, which is 30% higher than Miniso's 1.725 million yuan.

However, it has not yet shown advantages in profitability.

In the first half of 2024, Miniso's brand pre-tax profit margin reached 20.5%, while TOP TOY's brand was only 7.5%.

As the proportion of Miniso's IP derivative products increases and the store format further upgrades, TOP TOY's role in enhancing the group's profit margin will further diminish.

Dual-line Capital Operations

At this time, the spin-off of TOP TOY for listing may be related to the entire development cycle that Miniso is in In the past six months, Miniso has been actively engaged in capital operations.

In September 2024, Miniso spent 6.27 billion yuan to acquire a 29.4% stake in Yonghui Superstores (601933.SH), becoming its largest shareholder.

CFO Zhang Jingjing stated in a conference call after the acquisition of Yonghui that the 7 billion yuan in cash on the books has lowered the company's ROE (Return on Equity).

Zhang Jingjing mentioned that if Yonghui Superstores starts to turn a profit after adjustments in the future, this investment will greatly optimize Miniso's investment return rate.

The transaction will be paid in cash, sourced from the group's internal financial resources and 4 billion yuan in external financing obtained from commercial banks and other channels.

As of the end of September 2024, Miniso's cash and cash equivalents, restricted cash, time deposits, and other investments classified as current assets totaled 6.284 billion yuan, of which cash and cash equivalents amounted to 1.716 billion yuan.

The scale of this transaction is almost equivalent to Miniso's cash on hand.

In early January 2025, Miniso announced the issuance of convertible bonds totaling 550 million USD, approximately 4.03 billion yuan.

The maturity date for these convertible bonds is 2032, with a coupon rate of only 0.5%. At the same time, call option spreads with UBS and HSBC were also established.

In a high overseas interest rate environment, convertible bonds reduced financing costs compared to direct bond issuance.

Through the call option spread, Miniso raised the actual conversion price to 102.1 HKD, avoiding dilution of equity at a low price.

Shen Meng, a director at Chanson Capital, believes that Miniso's goal may be to optimize its asset-liability structure and financing costs during the time window when the valuation of Chinese assets is favored by policies and capital.

According to Zhang Jingjing during the communication meeting after announcing the acquisition of Yonghui, Miniso's interest-bearing debt ratio is only 0.04%.

Roughly estimating based on the third quarter data, if the 550 million USD convertible bond financing is included, the company's debt-to-asset ratio will rise from 40.7% to 52%, and the interest-bearing debt ratio will approach 19%.

There are still many areas where spending will occur in the future.

Miniso has committed to a dividend payout ratio of no less than 50% each year, and a stock repurchase plan is also being advanced simultaneously.

The announcement indicates that 50% of this bond financing will be used for stock repurchases, while the other 50% will accelerate the expansion into overseas markets.

Guosheng Securities analyst Du Yueying expects that this overseas store expansion will focus on three directions: advancing direct stores in the Americas, attempting to convert Southeast Asian store agencies to direct operations, and expanding stores in Europe.

As of the end of the third quarter of 2024, the number of Miniso's direct stores in overseas markets reached 422, double that of the same period last year.

Going overseas has become the most important growth narrative for Miniso.

According to the development plan proposed at the beginning of 2024, Miniso aims to open an average of 900 to 1,100 new stores each year over the next five years, with about 60% of the stores located overseas.

In contrast, TOP TOY's journey overseas has just begun.

At the end of August 2024, TOP TOY made its debut in Miniso's flagship store in Jakarta, Indonesia, in the form of a store-in-store. In October, it opened its first store in Thailand Bringing TOP TOY to the capital market may consider alleviating the investment pressure on the parent company and unlocking TOP TOY's expansion potential