You may not have heard of Pop Mart International (9992.HK) until recently – when everyone started to talk about Labubu, an IP going viral worldwide.
Like Laopu Gold, this Chinese toy maker has delivered one of Hong Kong’s most spectacular stock runs. Over the last five years, shares of Pop Mart International more than tripled.
In fact, in just 18 months, shares of Pop Mart surged from HK$20 to HK$275 – a mind-blowing 1,278% gain that beat nearly all TMT stocks.
What’s behind this incredible run? And more importantly, is the trend over?
Why Pop Mart shares exploded like a Labubu in a Blind Box
First, the Labubu mania. This mischievous-looking character with fangs and a furry texture became a global, cultural phenomenon.
Celebrities like Lisa from BlackPink and Rihanna even shared their Labubu collections online.
The result? THE MONSTERS series (featuring Labubu) produced ~CNY3 billion in 2024, which was an incredible growth of 726%.
Next, Pop Mart’s global expansion started to bear fruit. In fact, its international revenue soared 375% to CNY5 billion, which now accounts for 39% of the Groups’ total revenues.
Even countries like Vietnam and Thailand saw its flagship stores recording daily sales over CNY5 billion.
Lastly, analysts love what they see. Recently, Morgan Stanley raised its price target, while DBS Group initiated its coverage with a “Buy” rating and HK$312 target price.
Among 31 analysts, consensus is a strong buy with an average target price of HK$327 per share. Each earnings beat brings higher forecasts, pushing shares higher.
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Pop Mart’s incredibly simple business model
At HK$438 billion market cap, Pop Mart’s business model is incredibly simple: the company sells collectible figurines in “blind boxes.”
Customers don’t know which toy they’re buying until they open the package. It’s a surprise every time.
These toys include:
- THE MONSTERS (featuring Labubu): The current superstar producing CNY3 billion revenues
- MOLLY: The pouty-lipped girl with emerald eyes, which produces CNY2.1 billion revenues
- SKULLPANDA: The edgy character hitting CNY1.3 billion revenues
- CRYBABY: The newest hit reaching CNY1.2 billion revenues
Here’s the thing: By riding on its initial success in China, Pop Mart is rapidly expanding its global reach by opening stores in overseas countries.
Currently, the company sells through:
- 531 retail stores in China
- 130 overseas stores in 23 countries
- Online platforms like Tmall and TikTok Shop
- “Roboshops” – automated vending machines in malls
Pop Mart’s impressive financial numbers
The thing is, Pop Mart is a money-making machine. Its financial numbers read like a startup’s dream. Let’s dive in:
- Pop Mart’s 2024 revenues jumped 107% to CNY13 billion.
- Its net profits soared 189% to CNY3.1 billion in 2024.
- So far, the company achieved a healthy 24% net profit margin – impressive for any retail business.
What’s more, over the last five years, it saw a huge revenue and net profit growth…
During 2022, its dip was temporary due to COVID lockdowns. Since then, growth has accelerated dramatically.
But does Pop Mart pay sustainable dividends ?
Yes, but don’t expect to retire on Pop Mart’s dividends anytime soon. At current prices, its dividend is ~0.3%.
The thing is, this “blind box” giant is in rapid growth mode. And management prefers reinvesting its profits into new IPs, overseas stores and growth projects.
That’s why its payout ratio has dropped over the last few years.
What are Pop Mart’s future growth drivers
1. Global expansion
Pop Mart targets CNY20 billion in revenue by 2025, with overseas markets as the key driver. Current international markets include the US, UK, Canada, Australia, Japan, South Korea, and Southeast Asia.
Each new market brings localized collaborations – like the Indonesian Tropical Series and Louvre Paris Art Series.
The strategy works because Pop Mart’s characters transcend cultural barriers. A cute Molly figure appeals to fans in New York just as much as Beijing.
2. Dominating an IP ecosystem
Instead of just selling toys, Pop Mart is creating:
- Theme parks (Pop Land attractions)
- Animation studios
- Digital collectibles and NFTs
- Branded merchandise – mirroring Disney’s Mickey Mouse playbook
Tech and data: Pop Mart is big on AI and social media. For instance, when Lisa from BlackPink posted her Labubu, Pop Mart ramped up production instantly.
This data-driven approach helps them catch trends early and ride them to maximum profit.
What risks I’m watching for
Pop Mart’s success depends on creating characters that capture public imagination. But trends can change quickly – especially among young consumers.
If Labubu cools off or blind boxes lose their appeal, revenues could fall.
What’s more, despite international expansion, China still represents 61% of the company’s total revenue. Any economic slowdown in China could hit Pop Mart’s core market.
Lastly, Pop Mart’s still growing its economic moat, depending on exclusive artist partnerships and developing its intellectual property. At any point, these agreements can expire or be challenged.
More importantly, competition is intensifying from both local Chinese companies and international players entering the collectible toy space.
Knockoff products also threaten brand integrity – Pop Mart spends significant resources fighting counterfeiters.
My final thoughts – Bull or bear case
Pop Mart is a fascinating company with a proven business model and excellent growth prospects. So far, Pop Mart has delivered extraordinary returns for investors.
But shares now trade at a whopping 107x P/E ratio. This is a sky-high valuation that assumes continued massive growth..
The bull case: International expansion is still at an early stage, new IP development shows promise, and the collectible toy market is growing globally.
The bear case: The stock has run too far, too fast. At current prices, any disappointment in growth or new IP launches could trigger sharp corrections.
Pop Mart International is a fascinating growth story with Disney-like ambitions. But the stock leaves little room for error.
