POP MART(09992) 华泰证券·2024-10-09 04:03Investment Rating and Target Price - The report initiates coverage with a "Buy" rating and sets a target price of HKD 65.0 for the company, based on a 28x adjusted PE for 2025 [1][6] Core Investment Thesis - The company is a leading platform for commercializing trendy IPs in China, with a mature operational system covering IP incubation, efficient supply chains, and omnichannel sales [1] - Four key drivers for 2024-26: overseas market expansion, store optimization, product innovation, and operational efficiency improvements [1] - The company is expected to achieve adjusted net profits of RMB 2.21 billion, RMB 2.82 billion, and RMB 3.42 billion in 2024, 2025, and 2026, respectively [1] Industry Overview - The trendy toy market in China is experiencing rapid growth, driven by self-indulgence trends, female consumer power, and social media influence [2] - The domestic entertainment product market is projected to grow from RMB 71 billion in 2023 to RMB 128.9 billion by 2027, with a CAGR of 16% [2] - The global trendy toy market was valued at USD 57.1 billion in 2023, with significant potential for Chinese brands to expand overseas [2] Company Strategy and Growth Drivers - The company is transitioning into a "big trendy toy" era, focusing on internationalization, product innovation, and refined operations [3] - Overseas revenue accounted for 30% of total revenue in 1H24, with a projected year-on-year growth of over 200% for the full year [4] - The company plans to expand its overseas store count to 130-140 by the end of 2024, with strong performance in high-potential markets like Thailand and the US [4] Financial Performance and Projections - Revenue is expected to grow from RMB 6.3 billion in 2023 to RMB 15.6 billion by 2026, with a CAGR of 21.1% [5] - Net profit attributable to shareholders is projected to increase from RMB 1.08 billion in 2023 to RMB 3.34 billion by 2026 [5] - ROE is expected to rise from 14.69% in 2023 to 26.32% by 2026, reflecting improved profitability and operational efficiency [5] Competitive Advantages - The company has built a strong IP matrix, with 10 IPs generating over RMB 100 million in sales annually [14] - Its supply chain efficiency and digital systems have improved, with automation levels increasing from less than 10% to 30-40% in recent years [43] - The company has a deep membership system with 3.89 million members as of 1H24, and a high repurchase rate of 50% [45] Market Expansion and Product Innovation - The company is expanding its product lines beyond blind boxes, with new categories like plush toys, building blocks, and collectible cards contributing to revenue growth [41] - It plans to launch non-toy formats such as dessert shops and accessory stores by the end of 2024, leveraging its IP resources [41] - The company is also exploring IP licensing, gaming, and theme parks to diversify its revenue streams [60]