Investment Rating - The report maintains a "Buy" rating for the company [1] Core Viewpoints - The demand for trendy toys is not a false need; entertainment is a necessity. The "Kidult" trend, driven by demographic changes, media evolution, and consumer psychology, is a long-term trend in the toy industry, exemplified by the increasing market share of companies targeting adult consumers [1][14] - The global entertainment and media industry is projected to reach approximately $3 trillion by 2024, indicating a growing market for diversified entertainment offerings [1][35] Supply-Side Growth Potential - Store Expansion: The company has significant room for growth in retail locations, with a projected increase in global retail stores from 571 in 2025, with a substantial portion located in China [2][58] - Increased Store Traffic: Domestic single-store membership is expected to rise from 145,000 to nearly 200,000, indicating potential for higher customer traffic [2] - Higher Member Spending: The maturity of IPs is expected to drive up member spending, as seen with the SKULLPANDA IP, where the cost to collect all items increased significantly from 5,922 RMB in 2021 to 47,430 RMB in 2025 [2] Demand-Side Competitive Barriers - Artist Talent Barrier: The company has established relationships with mature toy artists, creating a long-term competitive advantage [3] - Marketing Resource Barrier: The company's business model relies on top-tier brand collaborations and celebrity endorsements, which are core competitive barriers [3] - User Data Asset Barrier: The company's direct sales channels enhance its ability to control user data and market feedback, improving operational efficiency [3] Valuation Safety Margin - The company's valuation is expected to be significantly above 10X PE, given its growth stage and the rising influence of China's cultural output on its growth trajectory [3] Profit Forecast and Valuation - The company is projected to achieve revenues of 369.57 billion RMB, 551.72 billion RMB, and 678.11 billion RMB for the years 2025-2027, with adjusted net profits of 123.76 billion RMB, 173.73 billion RMB, and 226.85 billion RMB, reflecting year-on-year growth rates of 295.98%, 40.37%, and 30.58% respectively [4][7] - The target price is set at 359.72 HKD, based on a 25X PE for 2026 [4]

Market Overview - The US stock market indices showed mixed performance on Friday, with the Hang Seng Index ADR closing at 26,719.08 points, down by 30.43 points or 0.11% compared to the Hong Kong close [1]. Major Blue-Chip Stocks - HSBC Holdings closed at HKD 130.896, up by 0.69% from the Hong Kong close [2]. - Tencent Holdings closed at HKD 598.184, up by 0.54% from the Hong Kong close [2]. Stock Performance Summary - Tencent Holdings (HKD 595.000) saw a decrease of HKD 2.500, or -0.42%, with its ADR price at HKD 598.184, reflecting an increase of HKD 3.184 or 0.54% [3]. - Alibaba Group (HKD 168.500) increased by HKD 3.700, or 2.25%, with its ADR price at HKD 168.834, up by HKD 0.334 or 0.20% [3]. - HSBC Holdings (HKD 130.000) rose by HKD 0.300, or 0.23%, with its ADR price at HKD 130.896, up by HKD 0.896 or 0.69% [3]. - Xiaomi Group (HKD 36.240) increased by HKD 1.000, or 2.84%, with its ADR price at HKD 36.287, up by HKD 0.047 or 0.13% [3]. - AIA Group (HKD 83.050) rose by HKD 0.550, or 0.67%, with its ADR price at HKD 83.077, up by HKD 0.027 or 0.03% [3]. - Meituan (HKD 97.550) increased by HKD 0.550, or 0.57%, with its ADR price at HKD 97.735, up by HKD 0.185 or 0.19% [3]. - Kuaishou (HKD 81.250) rose by HKD 2.150, or 2.72%, with its ADR price at HKD 82.648, up by HKD 1.398 or 1.72% [3]. - Ctrip Group (HKD 485.400) increased by HKD 3.800, or 0.79%, with its ADR price at HKD 490.273, up by HKD 4.873 or 1.00% [3].

Core Insights - The year 2025 is highlighted as a significant year for Chinese "Guochao" brands, with their influence extending from domestic to international markets [1] - Chinese consumers show a strong preference for domestic trendy brands, with 85.79% favoring them over foreign brands, indicating high recognition and influence in the market [2] - Global consumers appreciate Chinese trendy products for their cute designs, aesthetic value, quality, health attributes, and emotional value, facilitating cross-cultural communication [2] Group 1 - The popularity of LABUBU and its collaborations, such as with Heytea, demonstrates the successful appeal of Chinese brands in international markets, with LABUBU achieving over 10 million RMB in first-day sales in Thailand [1] - Different regions exhibit varied preferences for specific IPs, allowing brands like Pop Mart to diversify their offerings and reduce dependency on a single IP [2] - The phenomenon of products gaining popularity overseas before returning to domestic markets, as seen with Heytea's "Triple Thick Spread," illustrates a new trend in global consumption [3] Group 2 - Successful "Guochao" brands have developed a clear strategy for international expansion, prioritizing nearby markets and culturally familiar areas, as evidenced by Pop Mart's choice of Singapore for its Southeast Asia entry [4] - Pop Mart's unique consumer experience in the U.S. market has been recognized by analysts, indicating a lack of direct competition [5] - Heytea's strategy combines high-profile locations in major cities with localized product offerings, enhancing brand recognition and cultural relevance [5][6] Group 3 - The rapid growth of "Guochao" brands has led to challenges such as market overheating and issues with intellectual property protection, highlighting the need for cultural understanding in marketing [7] - Consumer feedback indicates a desire for improved alignment with international trends, deeper cultural exploration, and innovation in product design [8] - Future development for "Guochao" brands should focus on long-term value creation, quality assurance, and maintaining a fair trading environment [8]

Investment Rating - The report maintains a "Buy" rating for the company [1] Core Views - The demand for trendy toys is not a false need; entertainment is a necessity. The "Kidult" trend, driven by demographic changes, media evolution, and consumer psychology, is a long-term trend in the toy industry, exemplified by the increasing market share of companies targeting adult consumers [1][14] - The global entertainment and media industry is projected to reach approximately $3 trillion by 2024, indicating a growing market for diversified entertainment offerings [1][35] Supply-Side Growth Potential - Store Expansion: The company has significant room for growth in retail locations, with a projected increase in global retail stores from 571 in 2025, with a substantial portion located in China [2][58] - Increased Store Traffic: Domestic single-store membership is expected to rise from 145,000 to nearly 200,000, with the opening of the first U.S. store in September 2023 [2] - Higher Member Spending: The maturity of IPs is expected to drive up the average spending per member, as seen with the SKULLPANDA IP, where the cost to purchase all products increased significantly from 5,922 RMB in 2021 to 47,430 RMB in 2025 [2] Demand-Side Competitive Barriers - Artist Talent Barrier: The company has established partnerships with mature toy artists in Hong Kong, creating a long-term competitive advantage [3] - Marketing Resource Barrier: The company's business model relies on top-tier brand collaborations and celebrity endorsements, which are core competitive barriers [3] - User Data Asset Barrier: The company has strong control over user data and market feedback due to its direct sales channels, enhancing operational efficiency [3] Valuation Safety Margin - The company's valuation is expected to be significantly above 10X PE, given its growth stage and the rising cultural influence of China on the global stage [3] Profit Forecast, Valuation, and Rating - Revenue projections for 2025-2027 are 36.96 billion, 55.10 billion, and 67.74 billion RMB, with adjusted net profits of 12.38 billion, 17.35 billion, and 22.66 billion RMB, reflecting growth rates of 295.98%, 40.21%, and 30.59% respectively [4][7] - The target price is set at 359.72 HKD, based on a 25X PE for 2026 [4]

Summary of the Conference Call for Pop Mart Company Overview - **Company**: Pop Mart - **Industry**: Toy and Collectibles Key Points and Arguments Stock Buyback and Market Confidence - Pop Mart initiated its first stock buyback since January 2024, indicating confidence in its operations and countering negative impacts from short-selling activities. The first buyback involved 1.4 million shares at a cost of HKD 250 million, and the second involved 500,000 shares at HKD 96.49 million [2][3] Market Sentiment and Short-Selling Reports - Bernstein's short-selling report claims that the U.S. market will weaken and all IPs are deteriorating. However, this argument is based on secondary market prices and search indices, which do not accurately reflect actual sales and consumer loyalty. The report also presents contradictory expectations for the Chinese and U.S. markets [2][4][5] Domestic Market Performance - The domestic channel and IP structure are superior to international counterparts, with healthy foot traffic in offline stores. Q4 store efficiency grew nearly 40% year-over-year. Successful IP operations include "Starry People," while "Labubu" relies more on chance factors [2][6] New Product Launches and Innovation - Recent product launches, such as the "Year of the Horse" plush toys and the "Biqi Knock Knock" series, have performed well. The company is exploring diverse operational strategies, showcasing its ability to innovate and adapt to market demands [2][7] Future Growth Prospects - The outlook for Pop Mart is optimistic, with strong growth in domestic channels and a successful introduction of new products. The company is diversifying its IP value, laying a solid foundation for future growth. The U.S. market, while still developing, shows initial positive results [2][8] IP Management Strategy - Pop Mart focuses on consumer feedback and membership data for product modifications in single IP operations. Examples include the third and fourth generation of "Labubu" products, demonstrating the company's capability in IP and product innovation [2][9] Second-Hand Market Dynamics - The second-hand market's price fluctuations are attributed to supply-demand adjustments. Despite a previous surge in prices, the current supply is sufficient, leading to a natural price decline. The second-hand transaction volume accounts for only 10%-15% of total releases, indicating that most inventory is absorbed by genuine demand [2][10] Importance of the Chinese Market - The Chinese market is expected to contribute 50%-60% of sales in 2026, supported by a healthy IP structure and a robust membership system. This market is crucial for the company's growth [2][11] U.S. Market Potential - Although the U.S. market accounted for less than 20% of sales in 2025, it remains significant. The company is implementing various measures to enhance market health, including introducing new IPs and expanding store numbers [2][12] Expansion in Other Regions - Pop Mart is also focusing on markets like Canada, the Middle East, and South America, with notable performance in Canada and stable results in Southeast Asia, Japan, and South Korea since 2024 [2][13] Future Product Categories - The company plans to expand into new categories such as building blocks, jewelry, and movable dolls (BJD) to further scale its business. These emerging categories are gaining consumer interest and are expected to become future growth drivers [2][14][15] Overall Confidence in Future Development - Considering the solid domestic foundation, ongoing international expansion, and healthy IP structure, Pop Mart is viewed as a long-term growth potential with a favorable investment profile [2][16] North American Market Adjustments - In North America, Pop Mart has made adjustments to its channel and product supply due to supply chain issues. The company is narrowing online supply while increasing offline availability to address consumer demand fluctuations [2][17] Performance of Specific IPs - The "Biqi" IP has not received significant resource allocation but is still being explored. The company responds quickly to successful trends to maximize exposure and effectiveness [2][18][19] Global Business Development - Pop Mart is expanding globally, with new stores in regions like the Philippines and Dubai. The company is also exploring opportunities in other Middle Eastern countries [2][20] Sales Growth Projections - For 2026, domestic market growth is projected at 20%-30%, while overseas growth is expected at 50%-60%. The overall target is a 30% growth rate, with specific IPs like "Labubu" and "Starry People" anticipated to achieve significant sales milestones [2][20]

Core Insights - The product "PUCKY Knock Knock Series Electronic Wooden Fish" has generated significant consumer interest and social media buzz within a week of its launch, becoming a phenomenon similar to the Labubu IP [1] - The product combines traditional cultural elements with modern entertainment, catering to the emotional needs of young consumers in a high-pressure society [7] Market Performance - The hidden variant "Success" has seen its market price surge from the original price of 99 yuan to 396 yuan, representing a 300% premium; the regular variant "Wisdom" increased from 99 yuan to 209 yuan, a 100% premium [7] - The pricing strategy of 99 yuan per box and 594 yuan per set is perceived by fans as an entry ticket to emotional relief and psychological comfort rather than a financial burden [7] Industry Trends - The success of the electronic wooden fish reflects the rapid expansion of the "emotional economy," which is projected to exceed 2.3 trillion yuan in 2024 and surpass 4.5 trillion yuan by 2029, with a compound annual growth rate of over 15% [10] - The emotional economy focuses on fulfilling consumer emotional needs, differing from traditional consumption by emphasizing emotional experiences and psychological comfort rather than functional value [10] - Generation Z consumers prioritize "emotional price-performance ratio" over "cost-performance ratio," showing a willingness to pay a premium for emotional resonance, cultural identity, and self-expression [10]

Core Viewpoint - The 20th anniversary exhibition of the popular toy brand "Molly," created by designer Wang Xinming, is being held in Hong Kong, showcasing its development over the past two decades and celebrating its cultural impact through various city landmarks [2]. Group 1 - The exhibition theme is "A Star That Remains Unchanged," reflecting on the journey of "Molly" since its creation in 2006 [2]. - The exhibition is a collaboration between Pop Mart and the Hong Kong Tourism Board, aiming to enhance the city's cultural tourism through the "Molly" brand [2]. - The Hong Kong exhibition is the first global showcase for "Molly's" 20th anniversary, officially opening on January 24 [2]. Group 2 - The exhibition features a giant "Molly" art installation located in the West Kowloon Cultural District [2]. - Additional installations are set up at iconic locations such as Victoria Peak and the Sky Terrace [5]. - The exhibition includes displays of Wang Xinming's original sketches and recreations of his studio environment [13][15].

Group 1 - On January 23, 2026, Alibaba-W (09988), Pop Mart (09992), and Tencent Holdings (00700) ranked as the top three companies by trading volume in the Southbound Stock Connect, with transaction amounts of 4.748 billion, 2.660 billion, and 2.614 billion respectively [1] - In the Southbound Stock Connect for the Shenzhen-Hong Kong Stock Connect, Alibaba-W (09988), Tencent Holdings (00700), and Pop Mart (09992) also held the top three positions, with transaction amounts of 3.322 billion, 1.798 billion, and 1.370 billion respectively [1] Group 2 - In the Southbound Stock Connect, the top active trading companies included Alibaba-W (09988) with a net buy amount of -0.595 billion, Pop Mart (09992) with a net buy amount of +0.480 billion, and Tencent Holdings (00700) with a net buy amount of +0.396 billion [2] - In the Shenzhen-Hong Kong Stock Connect, Alibaba-W (09988) had a net buy amount of -0.895 billion, Tencent Holdings (00700) had a net buy amount of -0.156 billion, while Pop Mart (09992) recorded a net buy amount of +0.268 billion [2]

Core Viewpoint - The CEO of Pop Mart, Wang Ning, expressed frustration during a meeting regarding the delay in the introduction of new product bags, questioning the procurement process and accountability within the team [1][2]. Group 1 - Wang Ning inquired about the timeline for the new bags, highlighting that only a mini bag has been seen for a long time [1][2]. - He emphasized the need for accountability in the procurement process, questioning who is responsible for orders and why they have not participated in meetings [1][2]. - Wang Ning stated that he is proactive in addressing issues he observes, indicating a hands-on approach to design errors, such as color discrepancies in products [1][2].

Core Viewpoint - The founder of Pop Mart, Wang Ning, emphasizes that IP-based companies experience cyclical ups and downs, but they tend to be long-lasting due to the enduring nature of IPs that can evolve over time [1][2]. Group 1 - IP-based companies are characterized by experiencing multiple cycles of growth and decline [1][2]. - All IP-based companies globally are considered to have longevity, as once an IP is created, it can accumulate value over time [1][2]. - There is a belief that despite future cycles, IPs will continue to grow alongside successive generations [1][2].