POP MART(HK:09992)2024-08-22 02:39Investment Rating - The report maintains a "Buy" rating for the company, Pop Mart (9992.HK), and identifies it as a top pick in the consumer discretionary sector [1][7]. Core Insights - The company's net profit for 1H24 increased by 102% year-on-year, while revenue grew by 62%, surpassing the company's previous earnings guidance. Revenue from mainland China rose by 32%, demonstrating strong counter-cyclical characteristics of Pop Mart's products. Overseas revenue surged by 260%, attributed to the company's mature overseas expansion model and the significant potential of its IP in international markets [1]. - Management's guidance for 2H24 is optimistic, projecting a revenue growth of no less than 60% for the full year 2024, with overseas revenue expected to grow by at least 200%. The management's confidence indicates that the strong growth trend observed in 1H24 is likely to continue into 2H24 [1]. - The report highlights that the overseas direct-to-consumer (DTC) expansion is just beginning, with significant growth potential remaining. Despite the impressive 260% increase in overseas revenue in 1H24, the company only opened 45 new stores overseas, totaling 83 stores by the end of 1H24. The average sales per store in overseas DTC operations increased by over 130% year-on-year, indicating that the company is still in the market exploration phase [1][7]. - The IP matrix has become more balanced, with the Mega product's popularity driving a 90% increase in revenue for the Molly IP, which now accounts for 17.2% of total revenue. The Monster IP saw a 292% revenue increase, ranking second with 13.7% of total revenue. The diversification of product categories has also been successful, with the contribution of figurines (including blind boxes) decreasing from 72.5% in 1H23 to 58.3% in 1H24, while the shares of Mega and plush toys have significantly increased [1][7]. - The company is optimizing its supply chain by integrating and enhancing production capabilities, which allows for a quicker response to market demands. The collaboration with factories in Vietnam currently meets 10% of overseas demand, with plans to increase this share in the future [1]. Financial Summary - The target price for Pop Mart is set at HKD 60.6, representing a potential upside of 30.9% from the current price of HKD 46.3. The market capitalization is approximately HKD 62.111 billion, with an average trading volume of HKD 210.8 million over the past three months [3][20]. - Revenue projections for 2024-2026 have been raised by 10%-12%, and net profit estimates have been increased by 12%-21%. Following these adjustments, the company is trading at a P/E ratio of 27.5 for 2024, indicating a PEG ratio of less than 0.5, which is lower than most Chinese consumer stocks [7][17]. - The financial forecasts indicate that revenue is expected to reach RMB 10.339 billion in 2024, with a year-on-year growth of 64.1%. Net profit is projected to be RMB 2.255 billion, reflecting a 93.6% increase year-on-year [8][10].