Ladies and gentlemen, thank you for standing by, and welcome to MINISO Group Holding Limited Earnings Conference Call for the Fourth Quarter of Fiscal Year 2021 ending June 30, 2021. At this time all participants are in a listen-only mode. After the management's prepared remarks, we will conduct a question-and-answer session. Please note this event is being recorded. Now I'd like to hand the conference over to your host speaker today, Mr. Eason Zhang, Director of Investor Relations. Please go ahead, Eason.

Thank you, Monroe. Hello, everyone, and thank you all for joining us on today's call. The company has announced its corporate financial results earlier today, and the earnings release is now available on the Investor Relations website at ir.miniso.com. Today, you will hear from our Chairman and CEO, Mr. Guofu Ye, who will start the call with an overview of our business. He will be followed by our CFO, Mr. Saiyin Zhang, who will address our financial results in more detail before we take your questions. Before continuing, I'd like to refer you to the safe harbor statement in our earnings press release, which also applies to this call as we will be making forward-looking statements. Please also note that we will discuss non-IFRS measures today, which we have explained and reconciled to the most comparable measures reported under the international financial reporting standards in the company's earnings release and filings with the SEC. With that, I will now turn the call over to Mr. Ye. Please go ahead, sir.

[Foreign Language] Hello, everyone. On this call, I will give you an update on our operations in the June quarter and the full fiscal year 2021, and then share our development strategy for the full year 2022. [Foreign Language] We closed fiscal year 2021 with a solid fourth quarter. Revenue was RMB2.4 billion, up 59% year-over-year and within the company's guidance. Adjusted net profit was RMB145 million, up 242% year-on-year. In terms of regions, domestic revenue was RMB1.95 billion, up 43% year-over-year. Overseas revenues were RMB526 million, up 179% year-over-year. In terms of business units, MINISO, our flagship business, recorded revenue of RMB2.36 billion, up 57% year-over-year, accounting for 95% of our total revenue. Meanwhile, our other business recorded revenue of RMB110 million, up 136% year-over-year. [Foreign Language] MINISO experienced a tough operating environment in the June quarter due to the rapid spread of the Delta variant triggering a new round of the pandemic in Guangdong province and some overseas markets. In China, thanks to strong measures taken by the government, the spread of the pandemic was effectively limited in Guangdong and completely resolved by early July. As a result, domestic operations of the MINISO brand recorded revenue of RMB1.83 billion, up 39% year-over-year. Revenue from international operations in this quarter was RMB526 million, up 179% year-over-year. However, some of our overseas operations experienced revenue decline sequentially due to the impact of the Delta variant. Our distributor countries experienced revenue increases sequentially despite being lower than expectations. [Foreign Language] In China, we added 127 MINISO stores during this quarter, compared to a net decrease of two stores and a net addition of 38 stores during the same period of 2020 and 2019, respectively. This was encouraging for us, and we should give credit to our retail partners here. By the end of June, we had 820 retail partners, an increase of 80 year-over-year, with each partner adding an average of 3.5 MINISO stores. Despite the resurgences of the pandemic in China bringing short-term pressure, MINISO’s long-term potential in China remains unchanged, as we continue to unlock new opportunities in China's low-tier cities. 50% of new stores were from this market this quarter. We have many cities in our list to enter or further develop. [Foreign Language] We opened 35 new stores in overseas markets on a net basis this quarter, with 40% located in Europe. In Italy, MINISO opened three stores consecutively in April, attracting lines of consumers who waited outside the stores for a long time. This is the latest example of MINISO’s initial success in European markets such as Italy, France, and Spain. We look forward to continuing to serve European customers with MINISO's relaxing shopping environment and shopping experience. We also entered three overseas markets in this quarter, marking our entry into the 98th overseas market. [Foreign Language] During this quarter, the average number of store suspensions in overseas markets was about 300, down from 200 in the previous quarter, mainly due to the spread of the Delta variant. However, suspended stores were at a quarterly low of 205 by the end of June, down from 208 a quarter ago. The recent resurgence of the pandemic since July is expected to continue to impact international operations. [Foreign Language] We have adopted several measures to assist our overseas partners in tackling the challenges caused by pandemic resurgences. Firstly, we connected them to local channels such as supermarkets and online channels to boost sales, clear inventory, and get cash flow. For example, Morocco set up flash stores in the Philippines in collaboration with supermarkets. Our specialized team has enabled operations in about 50 overseas markets to move part of their sales online. Secondly, we launched a new business process management system this quarter, which has helped distributors integrate their business processes with standardized and visualized features. This system has improved overall efficiency and satisfaction among distributors. Finally, we continue to support distributor partners in managing their costs. [Foreign Language] As pointed out on our last call, MINISO has developed strong partnerships in its overseas markets. Now, they are more resilient to the uncertainties caused by the pandemic. We remain confident about MINISO’s long-term prospects in overseas markets, supported by our strong supply chain and product capabilities. We'll continue to collaborate with overseas partners to overcome challenges. [Foreign Language] Move to our online business: e-commerce revenue was around RMB200 million, up 133% year-over-year, mainly driven by the June 18 Mid-Year Shopping Festival. Total online business, including e-commerce and O2O, contributed 12% of our revenue. As of June 30, members who made at least one purchase during the past 12 months numbered about 33 million, up 9% year-over-year and 10% sequentially. [Foreign Language] We continue to expand our IP library, and this quarter has seen success in our corporate collaborations with top IPs such as TOY stores, the MBA, and Minions. IP sales increased by 79% and 59% driven over the same period in 2020 and 2019 respectively. [Foreign Language] In addition, we plan to leverage MINISO’s global store network to introduce more popular products, such as blind boxes in overseas markets. In the first half of the year, we achieved encouraging results in Southeast Asia and the Middle East. For example, in its first five days in Singapore, sales from blind boxes accounted for over 20% of total store sales. We will target more markets in Europe and Latin America this year. [Foreign Language] Now, TOP TOY: First of all, channel expansion is on track. During this quarter, our TOY brand opened four stores, bringing the total to 233 by the end of June, including 63 more stores and 27 collection stores. [Foreign Language] Recently, our TOY machine, co-branded by Top Toy, celebrated its grand opening, leading to a total of 54 TOP TOY stores and recording total sales of more than RMB1 million on its first day. We are also preparing for TOP TOY’s first exhibition at the China International Comics Festival in Guangzhou in early October. This 10,000 square meter exhibition will feature top brands such as Bandai and will be a great opportunity for us to promote TOP TOY and accumulate valuable experience. [Foreign Language] Secondly, TOP TOY’s business model is improving, with revenues increasing more than 180% sequentially. TOP TOY is still in the early stage of capacity building and brand promotion, but its gross margin has room to improve. Going forward, we expect TOP TOY’s gross margin to improve as operating leverage is gradually released by increasing its scale and maturity of its proprietary IPs. [Foreign Language] Thirdly, we continue to adjust our product structure as planned. TOP TOY’s proprietary products, including six proprietary IPs, now account for more than 5% of total sales, with a higher gross margin than third-party products. Our proprietary IPs launched just three months ago have started to perform well in the market. For example, sales of Twinkle and double Tumbler have stabilized within our top 10 products. Sales of Tammy's series have stabilized within the top 20. [Foreign Language] Moving on to fiscal year 2021, despite the ongoing impact of the global pandemic on the retail industry, we recorded positive growth with revenue reaching RMB9.07 billion. Domestic revenue was RMB7.29 billion, up 21% year-over-year, while overseas revenue was RMB1.78 billion, down 39% year-over-year. This year, we continued our overseas expansion, adding an additional 121 MINISO stores in the overseas market and entering our 90th overseas market, despite significant uncertainty caused by the pandemic. We also continue to see market potential in China's low-tier cities, with 60% of net new 106 MINISO stores in China located in this market segment. Additionally, we successfully completed our initial public offering, unveiled our strategy, and launched TOP TOY. We're moving towards our vision of becoming a leading global new retail platform. [Foreign Language] Looking ahead to fiscal year 2022, we remain committed to pursuing the following strategies. Firstly, we will continue to expand and upgrade our store network, deploying our business model. Secondly, we will focus on product and supply chain enhancements as well as the introduction of more popular products to fully leverage our strengths in product design and cost control. We'll also continue to execute our IP strategy and expand our IP library to maximize brand awareness and appeal. Thirdly, we will deepen consumer engagement and drive the omnichannel experience. We are also improving our ability to operate private traffic through mini programs, launching exclusive products, and enhancing our recommendation algorithm. Fourthly, we will closely monitor pandemic developments and dynamically adjust our business plans while cooperating with our overseas partners in various aspects to support their future development. Lastly, we will leverage our strengths and core capabilities to explore new business opportunities. [Foreign Language] This concludes my prepared remarks. I’ll now turn the call over to our CFO for financial results.

Thank you. I will start my remarks with a review of the June quarter financial results and then provide additional context regarding the September quarter. Please note that I will be referring to non-IFRS measures which have excluded share-based compensation expenses. Revenue was RMB2.07 billion, an increase of 59% year-over-year and 11% quarter-over-quarter, above the midpoint of the company's guidance range of RMB2.3 billion to RMB2.5 billion. The year-over-year increase was primarily driven by the growth of the company's domestic operations and a recovery of international operations. Revenue generated from the company's domestic operations was RMB1.95 billion, an increase of 43% year-over-year. Revenue generated from domestic operations of the MINISO brand was RMB1.83 billion, a 39% increase year-over-year, driven mainly by a year-over-year increase of 14% in average store count and a 23% growth in average revenue per store in China. Revenue generated from the company's international operations was RMB526 million, up 179% year-over-year, reflecting the recovery of the company's international operations from the same period in 2020. From a quarter-over-quarter perspective, revenue from the company's domestic operations increased by 9%, driven by a sequential growth of over 60% in MINISO’s offline sales in China and a 15% sequential growth in e-commerce business due to the June 18 Mid-Year Shopping Festival. Revenue from international operations increased by 19% sequentially. According to the National Bureau of Statistics in China, in the first half of 2021, retail sales of supermarkets, convenience stores, department stores, and specialty stores increased by an average of 22% compared to the same period in 2020, and a 7% increase compared to the same period in 2019. Over the same period, MINISO’s growth sales increased by 54% and 8% respectively, outperforming the industry average despite the backdrop of the pandemic resurgence in Guangdong province, which lasted nearly 50 days. During that time, the estimated loss in GMV was about RMB50 million. Gross profit was RMB639 million, up 68% year-over-year and 2% quarter-over-quarter. Gross margin was 25.8%, compared to 24.4% a year ago and 28.1% a quarter ago. The year-over-year increase in gross margin is primarily due to a higher revenue contribution from international operations, which typically has a higher gross margin compared to domestic operations. Revenue from international operations accounted for 21% of the company's total revenue compared to 12% in the same period in 2020. The quarter-over-quarter decrease was mainly attributed to increased promotional activities during the June 18 Mid-Year Shopping Festival and inventory clearances in certain cities to mitigate the negative impacts caused by the reoccurrence of the pandemic in Guangdong province. Selling and distribution expenses were RMB264 million, an increase of 15% year-over-year, but a decrease of 4% quarter-over-quarter. The year-over-year increase was primarily attributable to increased personnel-related expenses and marketing expenses associated with the year-over-year revenue growth and heightened brand awareness for MINISO and TOP TOY. The quarter-over-quarter decrease is primarily due to rent deductions related to COVID-19 in specific international markets. General and administrative expenses were RMB188 million, an increase of 59% year-over-year and 20% quarter-over-quarter. The year-over-year increase was predominantly due to increased personnel-related expenses and IT expenses for our new initiatives, particularly TOP TOY. We previously took steps to reduce our general and administrative expenses to tackle the challenges posed by the pandemic during the same period in 2020, resulting in a low comparison base for these expenses. The quarter-over-quarter increase was mainly attributed to increased professional service fees. Turning to our profitability, operating profit was RMB188 million, compared to a loss of RMB30 million in the same period of 2020 and a profit of RMB161 million in the previous quarter. The year-over-year improvement in operating profit was primarily due to business recovery both in China and overseas markets, while the quarter-over-quarter improvement was driven by a reduction in foreign exchange loss and credit reversal in this quarter. Adjusted net profit was RMB145 million, up 242% year-over-year and flat quarter-over-quarter. Adjusted net margin was 5.9%, compared to approximately 2.7% a year ago and 6.7% a quarter ago. Adjusted basic and diluted earnings per ADS were both RMB0.48 this quarter, compared to RMB0.15 a year ago and RMB0.52 a quarter ago. Turning to our balance sheet, as of June 30, 2021, the combined balance of the company's cash, cash equivalents, restricted cash, and other investments was RMB6.8 billion, compared to RMB2.86 billion a year ago. Turning to working capital, turnovers of inventories and trade receivables remained flat sequentially. The Board of Directors has approved a dividend of about RMB300 million, and I want to take this opportunity to share the company’s capital allocation strategy here. In deciding the total amount of the dividend, we considered the level of profitability that we achieved in fiscal year 2020 and what could have been achieved without the pandemic. In our future capital allocation strategy, we'll prioritize new growth opportunities, such as new strategic initiatives and new store expansions. We also remain committed to providing returns to shareholders through anticipated dividend payments. Looking ahead into the September quarter of 2021, we expect our total revenue to be between RMB2.45 billion and RMB2.65 billion, which represents an increase of 18% to 28% year-over-year. The latest resurgence of the pandemic from Nanjing in China has spread to several provinces and is still evolving. We currently estimate that sales will continue to be pressured by the lingering effects of the pandemic in the short term, leading to a reduction in traffic, or even the temporary closure of the Company store. We will continue to focus on elements of the business that are within our control, such as product innovation, inventory management, operating efficiency, and our omnichannel strategy to drive sales and protect margins. This concludes our prepared remarks; operator, we are now ready to take questions. Thank you.

We will now begin the question-and-answer session. Your first question today comes from the line of Michelle Cheng from Goldman Sachs. Go ahead.

[Foreign Language] So two questions for management. One is can you just please share the quarter-to-date trend for both China and a few important international market situations? And second, for TOP TOY, management mentioned that the gross margin upside will come from better product mix. So, can you share with us the IP development and other product mix enhancement strategies going forward? Thank you.

[Foreign Language] Okay, thank you for the questions, Michelle. In terms of the pandemic's influence on our business, this round of the pandemic began around July. We have taken active measures, such as increased online promotions and other strategies, to deal with it. It has impacted our business, but based on our recent trends, the influence is across the board in the three-tier cities. For tier-1 cities, the estimated loss in GMV for those influenced stores was about 10% of its daily normalized level. For tier-2, the impact is estimated to be more than 20%, and for tier-3, it's below 10%. We currently estimate that the overall impact for GMV is about 15% for our domestic business. In terms of provinces, the most impacted were Zhangzhou, Henan, and Honan, with losses of about 30% to 40% of their daily levels. Fortunately, the impact is diminishing as the pandemic is being controlled effectively. Based on past experiences, it usually takes about four to five days to resolve such situations, and we believe this time will be similar. [Foreign Language] Regarding recovery in overseas markets, in the June quarter, the overall recovery rate was about 55% compared to the same period in 2019. It was about 55% in April, 60% in May, respectively. In the Asian market, our largest market, about 40% of overseas growth has lagged behind peers, with a recovery rate during the June quarter of about 35% to 40%. In Latin America, our second largest, around 50% of stores are down, with a recovery rate of about 60%. Meanwhile, we see strong recoveries in the Middle East, North Africa, and Europe, with recovery rates of 70% and 77%, respectively. For example, Mexico has recovered to around 70% compared to the year 2019, while Asian countries, like Indonesia and India, stand at about 50% and 55% respectively. Countries in the Middle East, such as Saudi Arabia and Israel, have seen recovery rates between 51% and 64%. However, the overall recovery in these regions remains below 80%. [Foreign Language] For your second question on TOP TOY, we have eight core stores now, beyond which we have more than 40 connection stores. The average performance is quite stable, with Dreamworks’ monthly sales stabilizing at RMB2 million, while collection stores stabilize at RMB600,000. Overall, average sales per TOP TOY store exceed RMB900,000. In terms of products, we collaborate with about 200 suppliers and have developed more than 3,300 SKUs of popular products, with 500 sold out. Currently, approximately 80% of TOP TOY's sales come from its top 20 bestsellers. As previously mentioned, TOP TOY features eight categories and more than 120 sub-categories. The average ticket size for TOP TOY is relatively high at RMB150, while for Dreamworks it reaches RMB200. Notably, MINISO capitalizes on strong holiday traffic, with holiday revenues significantly contributing to overall sales. The sales of proprietary IPs now have a gross margin of about 60%. We aim for proprietary products, including IP and co-branding IPs, to comprise 20% to 25% of SKUs within a year and 30% to 40% in two years. TOP TOY's merchandise gross margin has improved to 43%, up from less than 40% six months ago, thanks to increased revenue contributions from proprietary products and improved bargaining power with suppliers. The increase in large orders will also bolster our gross margin moving forward. Thank you.

The next question comes from the line of Lucy Yu from Bank of America. Your line is open. Please go ahead.

[Foreign Language] Considering that COVID-19 is likely to persist for a relatively long time, how should we think about the development in both the domestic and overseas markets, especially regarding marketing and channel development? Additionally, could you provide updates on the development of new retail formats? And my second question is on margins. The GP margin declined slightly on a quarter-over-quarter basis. Could you break down the factors behind this margin contraction, such as promotional activities and inventory clearance? Lastly, how should we anticipate margin trends heading into the September quarter? Thank you.

[Foreign Language] This is Saiyin responding to your first question. Regarding channel expansion for our online business, we have experienced rapid growth over the past couple of years, with revenue contributions now around 12%. The year-over-year growth has consistently exceeded 100%. As an integral part of our omnichannel strategy, we will continue to invest in online, including outdoor business, direct-to-consumer platforms, and e-commerce. The e-commerce ecosystem has evolved drastically in the past year or two, with shifts towards live streaming and other formats. We will actively engage in these trends but will not exhaust cash on GMV growth; instead, we aim for profitable and sustainable business development. Moving forward, we will focus on digitalization to reach and activate all users in a cost-effective manner. [Foreign Language] Hi, this is Guofu Ye addressing the question about new business prospects. Our vision is to establish our position as a leading global new retail platform. We have internal integrations and we will not rush decisions; further updates will come with significant announcements. [Foreign Language] Regarding your questions on GP margin, as we discussed, two main reasons contributed to the sequential decline versus the Mid-Year Shopping Festival: increased promotions to uphold market share, and inventory clearances in response to the pandemic in Guangdong. These factors lowered our GP margin by about 1.5%. As for the upcoming September quarter, we don't foresee significant influences from the e-commerce side, as no major events are scheduled. However, regarding the pandemic that has spread from Nanjing to several provinces, we estimate it will take about 45 days to control it completely. In the short term, we anticipate continued gross margin pressure as we manage inventory clearance related to this Nanjing outbreak. Overall, we expect the GP margin for the September quarter to improve sequentially, but it may still be lower than our normalized levels seen in previous quarters. Thank you.

Okay. Thank you. The next question comes from Jerry Yang from CITIC. Please go ahead.

[Foreign Language]

[Foreign Language] Hey, Jerry. This is Guofu Ye. Thank you for your question. Regarding product revenue contributions, our eleven categories remain relatively stable and evenly distributed. Over the past two years, categories like toys and snacks have witnessed rapid growth. For instance, sales from TOP TOY now account for about 7.9%, while snack sales have reached 8.9%. The personal care category emerged as the star in the first half of the year, with revenue share now at about 10%, compared to 7% in the same period in 2020. Overall, the structure among our eleven categories remains stable, and we do not anticipate major changes in the future. However, we do see opportunities in certain categories such as toys and snacks. In the future, we believe there will be a growing market for culture and creative products, especially among younger consumers. Additionally, we have a strong position in IT products. As mentioned earlier, we have seen a 59% increase in sales of IP products compared to the same period in 2019, accounting for 25% of our total sales. Thank you.

[Foreign Language] Okay. I'll translate myself. This is Rebecca from Haitong International. I have one question regarding MINISO's overseas business. Could you please clarify our current revenue mix of three overseas models: direct operations, distribution, and franchising? Additionally, could you provide more color on the performance and trends of our distributors? Thanks.

[Foreign Language] Hi, Rebecca, thank you for your question. This is Saiyin. In terms of GMV, our distributor market usually accounts for 60% to 70% of our sales, similar to the distribution share of our other stores, with subsidiary companies accounting for 30% to 40%. Prior to COVID-19, in the second quarter of 2019, the GMV share of our subsidiary companies was about 30%. However, in this quarter's June figures, GMV from distributor countries accounted for 70% of our sales. In terms of merchandise delivery amounts from distributor orders, we observed a drop in total shipment orders of 30% to 40% compared to the same period in 2019, while this increased by around 60% compared to the same period in 2020. Additionally, as our CEO noted in prepared remarks, we've built successful partnerships with many strong overseas partners, which helps ensure stability during these difficult times. Our top 10 distributors account for about 60% of our international operations’ GMV and exhibit resilience. Thank you.

Okay. Thank you, everyone. Thank you for joining our conference call today. If you have any other questions, please do not hesitate to contact me or the investor relations team, and our contact information can be found in today's press release. We will see you next quarter. Have a nice day. Bye-bye.