[SINGAPORE] Analysts are still bullish on Chinese toy company favourite – Pop Mart International Group – despite its recent share price plunge, in view of its sustained popularity as an intellectual property (IP)-centric company.
The Labubu craze has sent Pop Mart’s shares up by more than 170 per cent since the start of the year, though the counter slid over 6 per cent on Friday (Jun 20). The shares last traded at HK$252.20 on Tuesday.
The tumble follows a news report by People’s Daily, the flagship newspaper of the Chinese Communist Party, which called for stricter regulations for “blind cards” and “mystery boxes”, as they encourage addictive behaviours among minors.
Nomura analysts raised their target price on Pop Mart to HK$291 in a Monday report, and kept their “buy” call on the stock. Citi Research analysts have a “buy” rating and a target price of HK$308, according to their note on Sunday.
CGS International has maintained its Jun 13 target price of HK$304, and reiterated its “add” rating on the counter.
“The market concern about the negative investment sentiment after the recent news is understandable,” Charlotte Zhou, China equity research analyst at CGS International, told The Business Times. “But we believe Pop Mart is the only IP company with a full-value chain – from IP acquisition to product sales in its direct-to-consumer stores – offering huge penetration potential in overseas markets.”
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“While the People’s Daily article mainly cautioned against blind cards given their popularity among minors, Pop Mart has very small exposure to blind cards specifically,” analysts Lydia Ling, Brian Cho and Wei Xiaopo from Citi Research explained.
In addition, the business’ customer base consists mainly of adults, and not minors, wrote the analysts.
“Our quantitative risk rating system shows a ‘high risk’ rating for the stock, but we believe it is not warranted,” they added, due to the company’s strong execution capability and growth profile.
Pop Mart’s achievements have certainly not gone without praise – even by Chinese media. The People’s Daily had published an article applauding Labubu for its popularity among youths and its success in going international – on the same day the commentary for greater regulations on the blind box market was released.
“We reckon the Chinese government’s attitude towards Pop Mart is in fact supportive,” said analysts Dong Jizhou and Riley Jin from Nomura Global Markets Research.
In their report on Monday, they increased FY2025 to FY2027 forward revenues and earnings forecast by 20 to 31 per cent, and 31 to 46 per cent, respectively, to factor in their strong sales growth forecast for the company in the first half of 2025.
This is partly owing to the fact that Pop Mart is a distinct case where Chinese consumer brands sell products to foreign consumers with a price premium.
Data shows that at a global level, the toy maker’s gross merchandise value increased by over 900 per cent year on year in North America, said CGS’ Zhou.
“Moreover, Labubu fans in the US also tend to purchase other IP products like Crybaby and Peach Riot when visiting stores,” she said.
Such success by the business in the US should be replicated in the South-east Asian market this year, according to the analyst, with an expected contribution of more than 15 per cent of total revenue in FY2025.
Increased supply contributed to share price dip
According to industry checks by analysts, restocking for the most recent round of Pop Mart’s Labubu V3 started from Jun 18, to fulfil surging demand for Labubus as resale prices escalated sharply.
“The frequency of restocking has been higher than previously, causing the price slump in the secondary market,” said Citi Research’s team.
Nomura analysts Jin and Dong similarly echoed how this secondary price drop of Labubu products is not due to decreased demand, but mainly the increase in supply, and how the company’s growth story on a whole is set to “stay intact”.
“We expect the recent Labubu V3 restock to drive sales momentum in the third quarter of 2025, with the company avoiding overstocking, curbing reseller activities and catering to real demand,” added Citi Research.
A good entry opportunity for investors
Overall, the analysts believe that the short-term negative news flow provides a good entry opportunity for investors to buy in to Pop Mart.
The Beijing-based toy company has been exploring new business formats, including a jewellery line Popop, Hirono concept stores, and Popland Beijing, an IP-themed amusement park.
“In our view, Pop Mart is transforming from a toy retailer to an IP-centric platform, shifting its focus from product sales to IP development and diversified operations. In the long term, these new ventures will help elevate the commercial value of its IPs, thereby contributing more revenue to Pop Mart,” said CGS’ Zhou.
