Core Viewpoint - The rise of the Z generation's consumption power and the upgrade of new consumption structures are driving the strong growth of the trendy toy sector, with companies like TOP TOY gaining attention in the capital market as they prepare for IPOs [1][2]. Company Overview - TOP TOY, established in 2020 and a subsidiary of Miniso, focuses on selling licensed IP toys, proprietary IP toys, and third-party brand toys, covering various categories such as blind boxes, building blocks, figurines, and more [1][2]. Financial Performance - TOP TOY has shown impressive financial growth, with revenue increasing from 679 million yuan in 2022 to 1.909 billion yuan in 2024, representing a compound annual growth rate (CAGR) of 67.7%. In the first half of 2025, revenue reached 1.36 billion yuan, a year-on-year increase of 58.5% [2][3]. - The company's gross margin improved from 19.9% in 2022 to 32.7% in 2024, although it slightly decreased to 32.4% in the first half of 2025 [2][3]. - TOP TOY transitioned from a loss in 2022 to a net profit of 212 million yuan in 2023, further increasing to 293 million yuan in 2024, with a net profit of approximately 180 million yuan in the first half of 2025, reflecting a year-on-year growth of 26.8% [2][3]. Market Position - By 2024, TOP TOY captured a market share of 2.2%, significantly lower than Pop Mart's 12.3% and slightly below Lego's 4.2%, yet it remains a notable player in the trendy toy industry [2][3]. Competitive Landscape - Despite its growth, TOP TOY's profitability is less than one-tenth of Pop Mart's, with a gross margin of 32.7% compared to Pop Mart's 66.8% in 2024, highlighting a significant gap in financial performance [3]. - The company relies heavily on licensed IPs, with 43 licensed IPs contributing 889 million yuan in revenue in 2024, while its proprietary IPs generated only 6.8 million yuan [4][5]. Challenges and Risks - TOP TOY's heavy reliance on licensed IPs poses a risk, as the expiration of key licenses could impact product supply and profitability. Key licenses for popular IPs like Sanrio and Disney are set to expire between 2026 and 2028 [5][6]. - The company's sales and distribution expenses surged by 102.4% in the first half of 2025, outpacing revenue growth, primarily due to overseas expansion costs [3][9]. - The cash flow structure shows positive operating cash flow but negative investment and financing cash flows, indicating a potential reliance on external financing to cover short-term liquidity needs [3][9]. Strategic Insights - TOP TOY's channel strategy relies on a franchise and distribution model, with significant revenue coming from Miniso, which accounted for 36.8% to 53.5% of total revenue over recent years [7][8]. - While the support from Miniso has facilitated rapid market entry, it may also limit TOP TOY's long-term growth if Miniso adjusts its partnership terms [8][9]. Conclusion - TOP TOY's rapid growth in the trendy toy sector showcases its potential, but structural issues related to IP dependency and channel reliance may hinder its ability to operate independently in the long term [9][10].