Hua Er Jie Jian Wen·2025-07-15 04:19Core Insights - UBS research indicates that Pop Mart has surged by 180% this year, driven by the popularity of Labubu, with a projected cash flow return on investment (CFROI) of 24% in 2024 and expected to exceed 40% in 2025/2026, significantly outperforming global peers [1][4] Financial Performance - The company's CFROI has improved to 24% due to a doubling in sales and a recovery in EBITDA margins, with a historical profit margin of 42%, far exceeding the industry median of approximately 20% [4][6] - Asset turnover has gradually reached the industry average, benefiting from accelerated sales growth over the past two years [4] Market Sentiment - Despite strong financial forecasts, the current market pricing model suggests a decline in CFROI to 32% by 2029, indicating skepticism about Pop Mart's ability to sustain high growth and profit margins [3][6] - There is a notable discrepancy between analysts' optimistic forecasts and the cautious market pricing, reflecting a lack of confidence in the company's long-term profitability [9] Valuation Scenarios - UBS's HOLT model outlines three potential scenarios for Pop Mart's stock performance: - Current Market Scenario: Implies a slight sales growth slowdown to 24% and a return of EBITDA margins to a five-year median of 35%, still outperforming peers [10] - Optimistic Scenario: If the company maintains a 28% sales growth and 40% profit margin, there is approximately 43% upside potential in stock price, positioning it as a "structural winner" [11] - Pessimistic Scenario: If the popularity of its IP declines, leading to a sales growth slowdown to 20% and profit margins dropping to around 25%, the stock could face a 42% downside risk, suggesting a "flash in the pan" perception [11] Strategic Positioning - Pop Mart is at a crossroads, with impressive financial metrics and growth momentum, but the critical question for investors is whether its strong IP creation and brand appeal can endure through market cycles and establish itself as a globally successful consumer brand [12]