Summary of Pop Mart Conference Call Company Overview - **Company**: Pop Mart International Group (9992.HK) - **Industry**: Consumer Products, specifically IP collectibles Key Points and Arguments 1. **Market Sentiment**: Pop Mart's stock has dropped 24% since its peak on August 26, contrasting with a 5% increase in the Hang Seng Index (HSI) [2] 2. **Supply Increase**: The company's supply ramp-up, aimed at curbing scalping and improving product availability, is viewed negatively by the market, which is considered counter-intuitive [2] 3. **Comparison with Pokémon**: Similar to Pokémon's strategy in 2021-22, Pop Mart's supply increase is expected to broaden its customer base despite a decline in resale prices [2][10] 4. **Sustainability Concerns**: Investors question the sustainability of Pop Mart's business model, as IP collectibles may not appeal to a mainstream audience [2] 5. **Growing Market**: The IP product industry is sizeable and growing, with Pop Mart positioned to capture rising demand from "kidults" [2] 6. **Sales Indicators**: Resale prices and stock-outs have lost correlation with sales trends, complicating the assessment of Pop Mart's near-term momentum [3] 7. **Consumer Behavior**: The supply increase may lead to reduced impulse purchases but also lowers barriers for new collectors, potentially supporting future demand [4] 8. **Product Availability**: The introduction of new products and the resolution of previous supply shortages are expected to spur demand in the coming months [4] 9. **US Market Dynamics**: Concerns about weakening US demand are noted, but management expects stronger sales in the second half of the year due to planned store rollouts [11] 10. **Diverse Consumer Base**: Pop Mart's US consumer cohort includes children, unlike in China, where the primary demographic is young adults [12] Financial Metrics 1. **Stock Rating**: Overweight with a price target of HK$382.00, representing a 49% upside from the current price of HK$256.40 [6] 2. **Market Capitalization**: Approximately US$44.257 billion [6] 3. **Revenue Growth**: Projected revenue growth from Rmb 13,038 million in 2024 to Rmb 54,757 million by 2027 [6] 4. **Earnings Per Share (EPS)**: Expected EPS growth from Rmb 2.43 in 2024 to Rmb 13.68 by 2027 [6] 5. **P/E Ratio**: Current P/E is 96.6, expected to decrease to 17.1 by 2027 [6] Risks and Challenges 1. **Product Appeal**: The ability to consistently create appealing products is crucial for maintaining IP value [32] 2. **Overseas Expansion**: Any failure to meet market expectations for overseas growth could lead to high volatility in share price [33] 3. **Pricing Management**: Raising average selling prices (ASP) in the US market could risk alienating core customers [34] 4. **Counterfeit Products**: The prevalence of counterfeit products poses a risk to brand integrity and IP value [35] 5. **Traffic Conversion**: Converting strong consumer interest into sales across different IPs is a challenge [36] Market Potential 1. **IP Product Market Growth**: The IP product market is expected to grow significantly, with Pop Mart's share projected to increase from 0.1% in 2018 to 8.2% by 2027 [24] 2. **Global Expansion**: Pop Mart is positioned to become a leading global consumer brand, similar to established names like LEGO and Disney [44] Conclusion - Pop Mart is navigating a complex market landscape with significant growth potential, driven by strategic supply management and product innovation. However, it faces challenges related to market perception, product appeal, and competition from counterfeit products. The company's ability to adapt and capitalize on emerging trends will be critical for its long-term success.

Investment Rating - The report does not explicitly state an investment rating for the industry or specific companies within the coverage Core Insights - The report discusses the impact of recent regulations on the blind box market, particularly focusing on the exposure of companies like Pop Mart, Bloks, Miniso, and Shanghai M&G to these regulations [1][2] - It highlights that companies with a more adult-skewed customer base and better control over distribution channels are less likely to be negatively impacted by the regulations [2] - The report emphasizes the importance of diversifying product offerings to mitigate risks associated with the blind box category [2] Summary by Relevant Sections Regulatory Impact - On June 20, People's Daily published an article addressing issues related to blind box purchases, particularly among minors, which led to a decline in share prices for companies in the coverage [1][3] - The article noted irrational consumption among minors and recommended stricter regulations, including age restrictions and guardian approval for purchases by minors over 8 years old [3][7] Company Exposure - Pop Mart and Bloks derive a significant portion of their revenue from blind box products, with Bloks having 63% of its revenue from this category in 2023 [2][8] - Miniso and Shanghai M&G have relatively lower exposure to blind box sales, with Miniso's toy category accounting for around 30% of its revenue [2][11] Market Sentiment and Valuation - The report indicates that regulatory news typically has a short-term negative impact on stock prices, but the long-term effects are often mitigated by strong fundamentals and earnings performance [2][8] - Historical data shows that share prices of Pop Mart and Miniso have rebounded after previous regulatory announcements, suggesting that market sentiment can recover quickly under favorable conditions [14][22] Company-Specific Strategies - Pop Mart targets an adult customer base, which may help it manage the impact of regulations, while also expanding its product offerings to include items beyond blind boxes [9][22] - Miniso's diversified product strategy and retail partner model in China help it maintain compliance and mitigate risks associated with specific categories [9][10] - Bloks faces challenges due to its high exposure to the blind box category and a distribution-heavy sales model, which may require more effort to ensure compliance with regulations [10][19] Financial Projections - The report provides sensitivity analyses for Bloks, indicating potential earnings downside risks of 15%-38% if sales from kids-related blind boxes decline significantly [10][19] - For Pop Mart, earnings forecasts have been revised upward for 2025-2027, reflecting strong growth momentum in both domestic and international markets [22][23]

Core Insights - Pop Mart has achieved record-breaking growth and global expansion through emotional consumption and IP innovation, with significant revenue increases projected for 2024 and 2025 [1][2]. Financial Performance - In 2024, Pop Mart's revenue exceeded RMB 13 billion, marking a fivefold increase since its listing on the HKEX in 2020 [2]. - The company's gross profit margin improved to 66.8% in 2024, with operating profit increasing by 238% [9]. - Revenue from overseas markets rose from 9.8% of total revenue in 2022 to 38.9% in 2024, indicating successful international expansion [11]. Brand Development - Pop Mart transitioned from a trendy variety store to a curated pop toy store, leveraging the blind box trend and original IP collaborations to drive growth [3][4]. - The company has focused on enhancing IP quality and diversifying its product offerings, including lifestyle products and collaborations with cultural IPs [16][28]. Consumer Engagement - Pop Mart has effectively utilized the blind box model to create emotional connections with consumers, fostering loyalty and repeat purchases through marketing and social media engagement [18][19]. - The brand has expanded its IP universe, with characters like "HIRONO" and "LABUBU" resonating with consumers and becoming symbols of self-expression and cultural identity [21][25]. Market Challenges - The competitive landscape in the pop toy industry is intensifying, with emerging players and established IPs posing challenges to Pop Mart's market position [30][32]. - Managing the lifecycle of original IPs and maintaining innovation will be critical for sustaining growth and consumer interest in the long term [32][33].

Financial Data and Key Metrics Changes - In 2024, total revenue reached RMB 17 billion, growing by 23% year-over-year, driven by an 80% increase in average store count, despite a low single-digit decline in comparable same-store sales [39][40]. - Gross profit margin improved by 3.7 percentage points to 44.9%, marking eight consecutive quarters of margin growth [42]. - Adjusted net profit reached RMB 2.72 billion, growing by 15%, with an adjusted net profit margin of 16% [51]. Business Line Data and Key Metrics Changes - MINISO China revenue grew by 11% to RMB 9.3 billion, while MINISO Overseas revenue surged by 42% to RMB 6.68 billion [40]. - TOP TOY contributed 45% to overall growth, with a net increase of 128 stores and a gross margin improvement of 7.3% [29]. Market Data and Key Metrics Changes - Overseas operations accounted for 39% of total revenue, up from 34% the previous year, with direct-operated overseas revenue growing by 66% [41]. - The US market showed triple-digit compound growth from 2021 to 2024, with 154 new stores added in 2024, bringing the total to 275 locations across 47 states [19][40]. Company Strategy and Development Direction - The company aims to double its store count by the end of 2028 compared to the end of 2023, focusing on store quality over quantity [65]. - A global strategy emphasizes localization, with a dedicated product development team established in South Korea to tailor merchandise for local markets [24][26]. Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in accelerated growth for 2025, with expectations of double-digit growth in offline business and continued strong performance in overseas markets [64][95]. - The company plans to implement disciplined cost control while sustaining rapid performance growth, particularly in the US market [64][95]. Other Important Information - The company achieved an ESG rating upgrade for three consecutive years, with an MSCI rating of AA, reflecting its commitment to sustainable development [35]. - A final dividend of approximately RMB 740 million was announced, representing 50% of adjusted net profit for H2 2024 [56]. Q&A Session Summary Question: Same-store performance in China and growth drivers - Management noted that larger stores showed better recovery, and plans to convert smaller stores into larger formats are underway. The performance of IP Land stores exceeded expectations, and these will be a key strategy moving forward [75][76][78]. Question: Profit per store in the US and same-store sales outlook - The US market is expected to see triple-digit growth in 2025, with ongoing improvements in GP margin anticipated as new stores mature [80][95]. Question: Margin outlook and YH transaction details - Management confirmed confidence in revenue and profit growth for 2025, with a focus on improving the profitability of directly operated stores. The YH acquisition aims to enhance product competitiveness and operational efficiency [94][100]. Question: New store opening targets for 2025 - The company plans to maintain a flat number of new stores compared to 2024, focusing on quality and strategic locations rather than sheer quantity [111][115]. Question: Introduction of third-party products and impact on sales - The introduction of third-party beauty products aligns with target demographics and is expected to enhance same-store sales and profitability [118][119].