Core Viewpoint - The stock price of Pop Mart (09992.HK) has significantly declined after reaching a historical high of 283.4 HKD, with a notable drop of 14.46% to 239.6 HKD, leading to a market capitalization loss of approximately 38 billion HKD, primarily driven by a sharp decrease in the prices of its flagship product, Labubu [2][9]. Group 1: Stock Price and Market Reaction - Following the news of Labubu's price collapse, Pop Mart's stock experienced a sharp decline, with a drop of over 6% on June 20, closing at 239.6 HKD, marking a 3.62% decrease for the day [2][9]. - The significant drop in stock price is attributed to the drastic reduction in Labubu's market price, which was exacerbated by a large-scale restock by Pop Mart [5][9]. - The market has seen a surge in short-selling activity, with short positions increasing from 1.438 million shares in early April to 3.692 million shares by June 17, a rise of 157% [10][12]. Group 2: Product Pricing and Market Dynamics - The price of Labubu's 3.0 series has plummeted, with the average transaction price dropping by 45% to 2547.84 RMB, and non-hidden variants experiencing a 54% decline [6][9]. - The drastic increase in supply due to Pop Mart's restocking efforts has outpaced market demand, leading to a rapid decline in secondary market prices [5][6]. - The overall market sentiment has shifted, with many consumers expressing dissatisfaction after purchasing Labubu at high prices, only to see their value drop significantly [9]. Group 3: Valuation Concerns - Pop Mart's current price-to-earnings (P/E) ratio stands at 95.34, significantly higher than competitors, raising concerns about a potential market bubble [12][14]. - Analysts have pointed out that the high valuation of Pop Mart, combined with the recent price drops, indicates a possible overvaluation in the current market environment [14][18]. - The company's reliance on IP products, such as Labubu, poses risks due to the cyclical nature of IP popularity and the potential for diminishing returns as the novelty wears off [17][18].

Core Viewpoint - The article discusses the challenges faced by Pop Mart, particularly during its downturn, emphasizing the importance of understanding the company's operational characteristics beyond surface-level explanations like the pandemic [3][5][11]. Group 1: Market Dynamics - The market is inherently opportunistic, showing favoritism during uptrends and being overly critical during downturns [2][3]. - Pop Mart's stock price fell significantly, dropping over 90% from its peak, with the decline attributed to valuation adjustments, performance concerns, and loss of investor confidence [12][13]. Group 2: Operational Challenges - In 2022, Pop Mart experienced a revenue growth of only 2.8% and a net profit decline of 44%, with gross margin decreasing by 4 percentage points to 57.5% [5]. - The pandemic's impact was not solely responsible for the company's struggles; operational and strategic issues, particularly inventory management, played a significant role [5][6]. - Inventory issues arose from over-ordering during a period of rapid expansion, leading to a need for aggressive clearance strategies that negatively affected profits and brand perception [7][8]. Group 3: Competitive Landscape - Increased competition in the collectible toy market contributed to profit declines, as companies faced rising costs and supply chain challenges [9][10]. - The competitive environment forced Pop Mart to adopt more complex manufacturing processes to enhance product quality, further straining margins [9]. Group 4: IP Management and Market Cycles - Pop Mart's business model is subject to the cyclical nature of IP (Intellectual Property) products, where the success of an IP can lead to market saturation and diminished consumer interest [15][16]. - The reliance on a few successful IPs for revenue growth creates inherent risks, as the lifecycle of these IPs can lead to fluctuations in sales and profitability [16][18]. - The company must continuously innovate and balance its IP portfolio to maintain growth, as the market's perception can shift rapidly [17][19]. Group 5: Strategic Shifts - The inventory challenges of 2022 prompted Pop Mart to accelerate its overseas expansion, discovering new market opportunities that led to unexpected growth [19]. - The company shifted its strategic focus towards international markets, which became a significant driver for revenue and stock performance in 2023 [19][20].