Summary of Pop Mart Conference Call Company Overview - **Company**: Pop Mart - **Industry**: IP Merchandise Market in China Key Points and Arguments Rating Upgrade - **Upgrade to Overweight (OW)**: Rating upgraded from Neutral to Overweight with a new price target (PT) of HK$320, up from HK$300 [1][4][18] - **Recent Share Price Movement**: Share price declined 24% from HK$335.40 (August 26) to HK$254 (October 2), while the Hang Seng Index (HSI) gained 7% during the same period, indicating a conservative investor sentiment [1][19] Financial Forecasts - **Earnings Growth**: Forecasted sales and adjusted earnings growth of 165% and 276% year-over-year (yoy) in 2025, with 204% and 372% growth in 1H25 and 144% and 234% in 2H25, respectively [1][17] - **2026 Projections**: Expected growth of 28% in sales and 29% in adjusted earnings in 2026 [1] - **Valuation**: Trading at 20x 2026 P/E, considered attractive compared to other consumer names [1][22] Upcoming Catalysts - **Operational Results**: 3Q25 operational results expected in late October [1][11] - **Seasonal Sales**: Anticipated strong sales for Halloween and Christmas [1][11] - **New Releases**: Launch of "Labubu & Friends" animation in December and Labubu 4.0 in March/April 2026 [1][11] Sales Momentum - **Strong Demand for IPs**: Continued strong sales momentum for Labubu and Twinkle Twinkle, with Labubu 3.0 and Mini Labubu sold out despite a 10x increase in production capacity [1][8][22] - **Twinkle Twinkle's Performance**: New plush series "Why So Serious" sold out within minutes, indicating a growing fan base [1][8] Global Market Considerations - **US Market Importance**: Sales contribution from the Americas expected to rise from approximately 21% in 2025 to 28% in 2027 [1][29] - **Tariff Impact Preparedness**: Pop Mart has prepared inventory for the US shopping season and can adjust retail prices to offset potential tariff impacts [1][29][30] Supply Chain Strategy - **Global Supply Chain Expansion**: Plans to establish six manufacturing centers globally, with four in China and two elsewhere, to mitigate tariff risks [1][29] Financial Metrics - **Revenue Estimates**: Revised revenue estimates for 2025E at Rmb34.5 billion, 2026E at Rmb44.1 billion, and 2027E at Rmb53.5 billion, reflecting a 5-8% increase [1][26] - **Adjusted EPS Growth**: Adjusted EPS for 2025E raised to Rmb9.09 from Rmb8.66 [1][6] Investment Thesis - **Market Leadership**: Pop Mart is a leader in China's fast-growing IP merchandise market with a strong portfolio of over 100 IPs and a significant global presence [1][11][28] - **Diversified IP Portfolio**: Labubu expected to contribute 35% of 2027 sales, with a diversified portfolio minimizing business disruption risks [1][31] Conclusion - **Long-term Growth Potential**: Pop Mart's strong IP sourcing and monetization capabilities, along with its global expansion strategy, position it favorably for long-term growth in the consumer market [1][28]

Investment Rating - The report downgrades the investment rating of Pop Mart to Neutral from Overweight, with a price target (PT) of HK$300, down from HK$400 [1][3][9]. Core Insights - The long-term investment thesis for Pop Mart remains intact, supported by its strong brand equity and sales momentum, despite recent challenges such as declining Google search interest and resale prices [1][9]. - The report highlights that the share price has increased significantly, with a 209% year-to-date rise and a 466% increase over the past year, leading to a valuation that is considered priced for perfection [1][9]. - Upcoming catalysts, including the release of new animation and product launches, have low visibility, which may impact future performance [1][9]. Summary by Sections Investment Thesis - Pop Mart is a leader in China's IP merchandise market, with a diverse portfolio of over 100 owned and licensed IPs, 571 retail stores, and 2,577 roboshops across more than 30 countries [9][10]. - The company is expected to benefit from its proven capability in sourcing and monetizing IP through social media, a diversified IP portfolio, and significant global exposure [9][10]. Financial Estimates - Revenue is projected to grow from Rmb13,038 million in FY24 to Rmb49,559 million in FY27, with a year-on-year growth rate of 106.9% in FY24 and 20.1% in FY27 [8][25]. - Adjusted net income is expected to rise from Rmb3,220 million in FY25 to Rmb17,890 million in FY27, reflecting a compound annual growth rate (CAGR) of 34% [8][25]. Valuation - The price target of HK$300 is derived using a PEG ratio of 1.1x, which is a 40% discount to the market-cap weighted average PEG of comparable companies [10]. - The report indicates that the current valuation reflects a 25x P/E for 2026 estimates, suggesting that the stock is fairly valued given its growth prospects [10].