POP MART(09992) 华西证券·2024-10-22 08:03Investment Rating - The report assigns a "Buy" rating to Pop Mart (9992 HK) with a target price of HKD 63 6 [2] Core Views - The global and Chinese trendy toy markets are experiencing rapid growth with CAGRs of 22 8% (2015-2019) and 32 8% (2015-2021) respectively The Chinese market is expected to reach RMB 76 4 billion by 2024 [2] - Pop Mart has established a comprehensive trendy toy industry chain platform with strong IP mining and operation capabilities Its domestic business is entering a high-quality development phase while overseas markets are becoming a second growth curve [2][3] - The company's revenue and net profit are expected to grow significantly from 2024 to 2026 with projected CAGRs of 39 6% and 51 9% respectively [3] Industry Overview - The trendy toy industry has evolved from a niche luxury market to a mass-market phenomenon driven by blind box products and expanding IP boundaries The global market size grew from $8 7 billion in 2015 to $19 8 billion in 2019 [10] - China's trendy toy market is still in a high-growth phase with significant room for penetration and concentration improvement The market size increased from RMB 6 3 billion in 2015 to RMB 34 5 billion in 2021 [12] - Z generation consumers aged 18-35 are the main driving force behind the trendy toy market accounting for 55% of purchases [13][14] Company Analysis Business Model - Pop Mart operates a full industry chain platform covering artist discovery IP operation consumer reach and trendy toy promotion It has established a leading sales network with 374 retail stores and 2 189 robot stores in mainland China and 92 retail stores (including joint ventures) and 162 robot stores in overseas markets as of June 2024 [2] - The company has developed a robust IP matrix including artist IPs (MOLLY DIMOO SKULLPANDA) and licensed IPs (Disney Marvel) In 2023 it had 10 artist IPs with sales exceeding RMB 100 million [30] Financial Performance - In H1 2024 Pop Mart achieved revenue of RMB 4 56 billion (+62 0% YoY) and net profit of RMB 921 million (+93 3% YoY) Overseas revenue grew 259 6% YoY accounting for 29 7% of total revenue [2] - The company's gross margin improved to 64 0% in H1 2024 driven by supply chain optimization and product structure improvement [44] Growth Drivers - Domestic growth is supported by store upgrades product category expansion and new channel development particularly on Douyin [47] - Overseas markets are becoming a key growth driver with revenue contribution increasing to 30% in H1 2024 The company is accelerating DTC strategy implementation and local market penetration [47] Future Outlook - Pop Mart is expected to maintain strong growth momentum with projected revenue of RMB 10 24 billion (+62 5% YoY) and net profit of RMB 2 11 billion (+95 3% YoY) in 2024 [3] - The company's PE ratios for 2024-2026 are estimated at 37X 28X and 22X respectively based on the closing price of HKD 63 95 on October 18 2024 [3]