Recently, Mingchuang Premium was affected by market shorting reports on the company, compounded by the executive team (including Executive Vice Presidents Li Minxin and Dou Na) to reduce their holdings twice, causing its stock prices in the US and Hong Kong to plummet, with a cumulative decline of 25% on the 3rd.

Faced with such turmoil, the company's management held a conference call on the evening of the 5th to clarify market concerns in detail, saying that the two executives had their own considerations in reducing their holdings, and that the shorting content was pure nonsense. Only then did the storm subside somewhat.

Although short-term doubts have been allayed, in the long run, Mingchuang Premium's dependence on mature overseas IPs has not changed significantly. The speed of expansion of stores in overseas markets and the uncertainty of the quality of store openings, which are highly anticipated by the market, have also cast uncertain variables on their long-term development prospects.

Three important managers are planning to increase their holdings

Improving cost performance and efficiency are the main themes of all walks of life in this year's weak macro environment. Mingchuang Premium - As a company known for its low prices and supply chain efficiency, it has performed particularly well in the China Securities Market this year.

The core of its business model is to optimize supply chain costs and improve efficiency to enhance price competitiveness. Supply chain advantages have been further externalized to overseas markets, and the high growth rate in overseas markets has once again opened the ceiling for Mingchuang Premium.

Recently, however, this “small commodity empire” has caused quite a few problems. Various market rumors and adverse factors have caused its stock price to drop 25% cumulatively in just 3 days. The core of cracking down on stock prices lies in two points: one is the reduction in stock holdings by company executives; the other is a shorting report that is still on the way.

In order to stabilize stock prices, the management of Mingchuang Premium quickly held a conference call on the evening of December 5 to clarify the above concerns in detail.

• In response to the holdings reduction crisis

Regarding Executive Vice President Lee Min-shin's holdings reduction, the company stated that it has its own retirement plans. It is not uncommon for executives to choose to reduce their holdings at some stage in their careers due to personal plans or financial needs;

Another executive, Dou Na's holdings reduction is a continuation of Colar's earlier financing in September. Under the Collar structure, shareholders can lock in a certain percentage of the actual stock price and have the option to buy back the shares pledged by the investment bank in the future. Instead, this kind of operation is their confidence in their long-term holdings of the company's shares.

In addition to this, the company also emphasized its management's long-term confidence in the company's business value and business model. Huang Zheng, CFO and vice president of overseas agency marketing, and Yao Jianzheng, vice president of MINISO's China Operations Division, plan to buy a number of shares within the next month.

• Targeting the “shorting report”

In response to the “shorting report” that has not yet been released, the company said the content of the shorting report was pure nonsense.

In particular, the report mentioned that the Pakistan market is a regulator of the company's overseas revenue and profits. According to company data, from the beginning of the year until now, Pakistan's delivery volume has only accounted for 0.3% of overseas shipping revenue. Based on this fact, it is unrealistic to say that a company regulates its overseas revenue and profits through such a very small market.

In response, the company said it is ready to deal with the shorting report and plans to use a stock repurchase plan of up to 200 million US dollars at any time to protect the legitimate rights and interests of existing investors.

Overseas direct sales markets are particularly impressive, but there is still uncertainty about the speed of store expansion

The response of Mingchuang Premium's management to concerns about the market calmed the turmoil in the short term.

However, in the long run, the company's development prospects also depend on whether revenue growth continues to exceed expectations and whether profit margins are still on the path of improvement. In particular, whether the overseas market can contribute significant growth to the company like TEMU for Pinduoduo is the market's greater expectations for it.

According to the latest Q4 performance guidelines revealed by management, Mingchuang Premium's overall revenue increased by about 50%, its domestic market increased by about 60%, and the overseas market increased by 40%-45%. Among them, the direct sales market performed particularly well, with a year-on-year increase of close to 80%, falling at the upper end of the original guideline of 60%-80%; the agency business had a low double-digit year-on-year growth rate.

The overseas direct sales market is a key development direction for Mingchuang Premium due to its high gross margin. According to Mingchuang Premium, since management efficiency in overseas markets is far lower than at home, in regions such as the US, it is possible to drive more than 10% of sales by improving basic loading and handling operations, and there is still room for refinement in the multiple dimensions of number of stores opened, single store sales, store operation efficiency, inventory accuracy rate, product accuracy rate, and product sell-out rate.

However, in response to the decline in the growth rate of the overseas agency market, the company explained that overseas agents cover 80 markets and plans to open about 20 stores in each market, for a total of close to 1,500-1,600 stores. Currently, the penetration rate is far from being achieved, which means there are still opportunities to open encrypted stores.

However, it is worth noting that the speed and quality of a company's expansion in overseas markets may be significantly affected by the economic cycle. The rate of expansion is closely related to the flow of local people, preferences of overseas residents, and the degree of market competition, and these factors may bring more uncertainty in the context of the economic downturn.

Moreover, the speed of store expansion in overseas markets has always been difficult to compare with that of the domestic market. Compared to the domestic market, which achieved its annual target in the third quarter, the overseas market has only completed half of the tasks.

Popular IPs are both an opportunity and a risk

Looking back at the domestic market, Mingchuang Premium's GMV (total product transaction volume) growth rate in China was in line with expectations. Offline GMV increased 80%, and the average daily GMV for a single store in January-November recovered to close to 100% in '21 and recovered to 80-85% in '19. This is in line with the outlook for store performance at the beginning of the year.

In terms of gross margin, the company said it reached a new high in October, and it continues to rise. In the end, the gross margin of store operations was around 20%, and the Group's net profit margin reached about 16%.

One key strategy to increase gross margin is to focus on consumption interests such as big beauty, big IP, and big toys. The gross margin of this type of product is often higher than that of the average product, around 60%. In the third quarter, about 60% of products with domestic sales exceeding 10 million came from consumer interest.

Mingchuang Premium's performance in the field of consumer interests is largely due to joint partnerships with well-known IPs. Products such as blind boxes and toys are tied to well-known IPs, which not only brings higher premiums, but also attracts a wide range of IP enthusiasts. In the third quarter, Mingchuang Premium's co-branded products, Barbie, and Loopy sold well, which became an important factor driving performance growth.

At the same time, however, the market is concerned that Mingchuang Premium's sales may fluctuate drastically depending on the quality and quantity of IP. When the popularity of Barbie and Loopy falls next year, sales will decline accordingly.

In response to this concern, Mingchuang Premium said it is expanding the scope of its IP cooperation. The company said it has cooperated with New Korea IP and will launch it to the global market next year. In addition, the company is also trying to promote some relatively niche IPs to ensure a sufficient number of diverse IP resources.

Despite this, the company's reliance on external IP has not changed, and judging from the third quarter data, Mingchuang Premium's self-developed IP brand's share of sales is declining.

The market expects Mingchuang Premium to have its own “Loopy”.