The Stock Exchange of Hong Kong Limited and the Securities and Futures Commission take no responsibility for the contents of this Application Proof, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Application Proof. Application Proof of TOP TOY International Group Limited 大潮玩國際集團有限公司 (the "Company") (A company incorporated in the Cayman Islands with ...

Core Insights - Here Group Limited reported a revenue of RMB177.3 million (US$25.3 million) for the second quarter of FY 2026, marking a 39.4% increase quarter-over-quarter, and this is the first full quarter operating as a fully independent IP trend company [3][4][8]. Financial Performance - Revenues for the second quarter of FY 2026 were RMB177.3 million (US$25.3 million), reflecting the performance of the high-growth pop toys business [4]. - The cost of revenues was RMB122.3 million (US$17.5 million), leading to a decline in gross margin due to the strategic expansion of offline channels [5]. - Sales and marketing expenses amounted to RMB52.8 million (US$7.6 million), primarily for advertising and promotion [6]. - Research and development expenses were RMB9.1 million (US$1.3 million), focused on IP design and product development [9]. - General and administrative expenses totaled RMB31.3 million (US$4.5 million), covering core corporate functions [10]. - The net loss from continuing operations was RMB25.4 million (US$3.6 million), with an adjusted net loss of RMB16.1 million (US$2.3 million) [12][8]. Strategic Focus - The company is committed to enhancing its IP development and product iteration while refining its organizational structure and operational foundation [3]. - There is a strategic emphasis on increasing the contribution from offline sales channels to enhance user engagement and emotional connection with IPs [3][5]. - The company aims to capture significant opportunities in the global IP trend market and deliver long-term value to shareholders [3]. Future Outlook - The company expects revenues from the pop toy business to be in the range of RMB140.0 million to RMB150.0 million for the third quarter of FY 2026 and RMB750.0 million to RMB800.0 million for FY 2026 [14]. Recent Developments - As of March 6, 2026, the company has repurchased a total of 1.7 million ADSs for an aggregate consideration of US$10.8 million under the 2025 Share Repurchase Program [15].

Investment Rating - The report rates Pop Mart shares as a Buy, indicating a strong investment opportunity in the pop toy sector [12][4]. Core Insights - Pop Mart is recognized as a leading player in the pop toy industry in China, with a strong capability in IP incubation and operation, which positions it well for growth in the consumer market [12][11]. - The company is expected to see improved investor confidence with upcoming product launches and the popularity of its non-LABUBU IPs in international markets [1]. - The report highlights the company's proactive approach to managing growth sustainability and addressing single IP risks through a diversified IP ecosystem [3]. Financial Performance - For the fiscal year ending December 31, 2025, the projected net profit is RMB 13,551 million, with a diluted EPS of RMB 10.160, reflecting a significant growth of 333% compared to the previous year [3][7]. - The expected total return on shares is 93.9%, with a target price set at HK$415.00, representing a potential share price return of 91.8% from the current price of HK$216.40 [4][7]. Growth Strategy - The company plans to enhance the LABUBU IP with new product launches and designs, aiming for a strong market presence in 2026 [2]. - Pop Mart is expanding its international footprint, with plans to operate over 60 stores in the US by the end of 2025 and additional stores in Canada, Mexico, and the Middle East [8]. - The company is focusing on localized operations in overseas markets, including collaborations with local artists and IP designs [8]. Supply Chain Management - Pop Mart is optimizing its production strategy by initially producing 70% of projected sales volume and adjusting stock based on market demand, which is expected to improve sales projection accuracy [9]. - The company has expanded its overseas supply chain, with a portion of production now in Vietnam, and plans to establish more local warehouses for international markets [9].

Summary of Pop Mart (9992.HK) Conference Call Company Overview - **Company**: Pop Mart International Group Ltd - **Industry**: Pop toy industry - **Market Position**: Largest pop toy company in China, expanding globally with strong IP incubation and monetization capabilities [17][18] Key Financial Highlights - **3Q25 Revenue Growth**: Achieved revenue growth of **245-250% YoY**, driven by **185-190% YoY** growth in the PRC and **365-370% YoY** growth in overseas markets [1][2] - **1H25 Comparison**: Revenue growth in 1H25 was **204% YoY**, indicating a significant acceleration in the latter half of the year [2] - **Sales Channels**: - **PRC Offline Sales**: Grew by **130-135% YoY** - **PRC Online Sales**: Surged by **300-305% YoY** - **Overseas Sales**: - **America**: **1265-1270% YoY** - **Europe & Others**: **735-740% YoY** - **APAC**: **170-175% YoY** [2][9] Operational Insights - **IP Recognition**: The company is enhancing its IP influence through marketing events and collaborations, including a **10th Anniversary Global Tour** and art installations [3] - **Product Launches**: New product releases, particularly under the **TWINKLE TWINKLE** IP, are driving rapid sell-through rates [3] Financial Projections - **Target Price**: Increased to **HK$415**, reflecting a **65.7% expected return** from the current price of **HK$250.40** [4][8] - **Earnings Forecast Adjustments**: FY25-27E earnings forecast adjusted upwards by **16.8-17.3%** due to a more promising sales outlook [1][11] - **Valuation Ratios**: - FY25E P/E: **22.6x** - FY26E P/E: **16.7x** [1][8] Investment Strategy - **Recommendation**: Maintain a **Buy** rating, emphasizing the importance of sell-through trends over secondary market performance [1][18] - **Market Cap**: Approximately **HK$336,273 million** (US$43,289 million) [4] Risks and Challenges - **Competitive Landscape**: Rising competition in China's pop toy market with new entrants [21] - **Global Expansion Risks**: Potential disappointments in overseas market performance [21] - **IP Commercialization**: Risks associated with the inability to effectively commercialize IPs and renew licenses [21][20] Conclusion Pop Mart is positioned for continued growth driven by strong revenue performance, effective IP management, and a robust marketing strategy. However, investors should remain cautious of competitive pressures and execution risks in its global expansion efforts.