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].