Core Viewpoint - The recent decline in Pop Mart's stock price, which has dropped nearly 25% from its peak on August 26, is primarily driven by market concerns over the second-hand prices of certain popular products and the sustainability of their popularity. However, the company believes that second-hand prices are not a reasonable indicator of popularity, as the current price adjustments are mainly driven by supply expansion rather than changes in demand [1][2]. Group 1: Supply and Demand Dynamics - The fluctuation in the second-hand prices of Labubu is attributed to increased supply rather than a decline in popularity, as evidenced by stable or increasing prices for products not affected by capacity changes [2]. - The company maintains a leading position in the artist IP toy market, with exclusive brand positioning and control over supply, which allows for a highly expandable product lifecycle [2]. - The balance of supply and demand is crucial for enhancing fan experience and mitigating the impact of counterfeit products [2]. Group 2: Product Innovation and Pricing Strategy - Recent product launches, such as Mini Labubu, have generated significant fan engagement and strong sales performance in North America, showcasing the company's ability to blend product and social play [3]. - The company has demonstrated flexibility in pricing strategies, as seen with the price increase of SP plush toys to 159 yuan, indicating strong pricing power in the rubber plush category [3]. - Upcoming quarterly results are anticipated to be positive, driven by pre-sale shipments and new product launches, with Q4 expected to benefit from the overseas peak season and anniversary series [3]. Group 3: Long-term Growth Drivers - The company is expected to see substantial growth in 2026, driven by rapid capacity expansion in plush products and a low base in the first three quarters [4]. - The global commercial value of the company's largest IP, The Monsters, has significant growth potential, with the top five IPs showing strong momentum [4]. - The company plans to expand its overseas store count to over 180 by 2025, enhancing brand influence through flagship store openings [4]. Group 4: Financial Forecast and Valuation - The company has raised its adjusted net profit forecasts for 2025-2027 by 14%/12%/12% to 116 billion, 170 billion, and 220 billion yuan, respectively, driven by capacity expansion and product upgrades [4]. - The target price has been increased by 14% to 396 HKD, maintaining a "buy" rating based on the company's high growth potential and expanding global IP influence [4].

Investment Rating - The report maintains a "Buy" rating for Pop Mart (9992 HK) with a target price of HKD 396.00 [2][6]. Core Viewpoints - Recent stock price corrections of Pop Mart, which have dropped nearly 25% from the August 26 high, are primarily driven by market concerns over the decline in second-hand prices of certain popular products and the sustainability of their popularity. However, the report argues that second-hand prices are not a reasonable measure of popularity, as the current price adjustments are mainly driven by supply expansion rather than changes in demand [2][3]. - The company is expected to achieve a successful path of "artistic equity," which lays a solid foundation for sustainable long-term growth. The report suggests that investors should actively seize the opportunity to position themselves for future gains [2][3]. Summary by Sections Second-Hand Price Fluctuations and Supply-Demand Dynamics - The recent fluctuations in the second-hand prices of Labubu are attributed to increased supply rather than changes in demand. The report highlights that the second-hand prices of products unaffected by capacity changes, such as Labubu blind box figures, have remained stable or increased, indicating strong IP popularity [3][12]. - Pop Mart's unique brand positioning and supply control in the artist IP toy market provide it with a competitive edge, reducing the likelihood of new entrants causing supply excess and price instability [3][14]. New Product Launches and Pricing Strategies - Recent product launches, such as Mini Labubu, have generated significant fan engagement and strong sales performance in North America. The company demonstrates flexibility in pricing strategies, allowing for differentiated pricing across various IPs and series [4][5]. - The upcoming Q3 earnings report is anticipated to reflect positive impacts from new product releases and the holiday season, with expectations for continued high growth in Q4 [4][5]. Long-Term Growth Drivers - The report outlines several growth drivers for Pop Mart's performance through 2026, including rapid capacity expansion in plush toys, a diverse range of new product categories, and the potential for significant revenue growth from major IPs like The Monsters [5][23]. - The company is expected to continue expanding its store presence, particularly overseas, which will enhance brand influence and customer acquisition [5][23]. Profit Forecast and Valuation - The report projects adjusted net profits for 2025-2027 to be RMB 116 billion, RMB 170 billion, and RMB 220 billion, respectively, reflecting an upward revision of 14% for 2025 [6][9]. - The target price is set at HKD 396, based on a PE ratio of 42x for 2025, which is higher than the average PE of comparable companies [6][33]. Unique Business Model and Market Position - Pop Mart's unique business model, characterized by strong control over the entire industry chain, allows for both IP innovation and product category innovation, reinforcing its market position [31][34]. - The establishment of a global fan ecosystem enhances the company's ability to transmit heat across regions and IPs, further solidifying its competitive advantage [34].

Core Viewpoint - Huatai Securities reports that Pop Mart's capacity ramp-up leads to a rebalancing of supply and demand, indicating a successful path for the company's "art equality" strategy, establishing a solid foundation for sustainable long-term growth [1] Group 1: Company Performance - The report suggests that the adjustment in the shareholding structure is likely to become more long-term oriented, recommending investors to actively seize layout opportunities and maintaining a "buy" rating while raising the target price by 14% to HKD 396 [1] - The company possesses significant pricing power over its vinyl plush products, allowing it to implement differentiated pricing strategies across various IPs and series, thereby maximizing profitability [1] Group 2: Future Expectations - Anticipation for the upcoming Q3 results is high, driven by pre-sale shipments and new products like Mini Labubu, with expectations for continued strong performance in the fourth quarter due to the overseas peak season and anniversary series new products [1] - Huatai Securities has raised its adjusted net profit forecasts for 2025 to 2027 by 14%, 12%, and 12%, reaching CNY 11.6 billion, CNY 17 billion, and CNY 22 billion respectively [1] Group 3: Market Dynamics - The diversity in target audience, product categories, and experiential formats is seen as the three pillars supporting the longevity of Pop Mart's IP [1]