Hua Er Jie Jian Wen·2025-09-15 05:35Core Viewpoint - JPMorgan warns that Pop Mart's stock, which surged over 200% this year, has reached "perfect valuation," leading to a significant decline in entry price attractiveness and a rapidly deteriorating risk-reward ratio [1][3]. Stock Performance - On September 15, Pop Mart's stock dropped significantly, hitting a low of 252 HKD per share, the lowest since August 5, and down over 25% from its previous record high [1]. - Year-to-date, Pop Mart's stock has surged 209%, and over the past year, it has increased by 466%, far exceeding the Hang Seng Index's gains of 32% and 52% during the same period [3][6]. Rating and Target Price Adjustment - JPMorgan downgraded Pop Mart's rating from "Overweight" to "Neutral" and reduced the target price from 400 HKD to 300 HKD [4][6]. - The downgrade reflects concerns that the stock price has risen too quickly and too high, resulting in short-term risks outweighing potential returns [5]. Valuation Model Changes - The PEG ratio used by JPMorgan was adjusted from 1.5 to 1.1, indicating an increased focus on risk considerations at current high valuations [7]. Catalysts and Market Sentiment - Four out of seven previously identified catalysts for Pop Mart's stock performance have been realized, including strong performance reports and successful collaborations [8]. - However, three potential catalysts remain uncertain, including the release of the "Labubu & Friends" animation and new product launches [9][10]. Core IP and Market Dynamics - Concerns regarding the sustainability of the core IP Labubu's popularity have arisen due to declining resale prices in the secondary market, attributed to rapid production capacity expansion rather than a decline in IP popularity [11][12]. - The resale price of Labubu 3.0 in China dropped from a peak of 2284 RMB to 687 RMB, a decline of 70%, yet still maintains a 15% premium over retail price [12]. Long-term Investment Logic - Despite the downgrade, JPMorgan does not recommend "Underweight" and maintains a positive long-term investment outlook for Pop Mart, citing three key pillars: strong IP commercialization capabilities, a diversified IP portfolio, and successful global expansion [15][16][17]. - The company is recognized for its management quality and execution capabilities, ranking alongside top consumer goods companies in China [18].