From "scarcity" to "slowdown"? Bearish Deutsche Bank: Pop Mart's IP cycle has peaked, faces more severe decline risk in the second half of the year

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Deutsche Bank has issued a warning that Pop Mart's era of high growth may have reached a turning point.

According to Wind Chasing Trading Desk, Deutsche Bank released its latest research report on July 8, maintaining a "Sell" rating for Pop Mart with a target price of HKD 140, implying roughly 10% downside from the current share price of HKD 154.90.

Deutsche Bank analysts pointed out in the report that Pop Mart's revenue growth in Q2 2026 is expected to drop to only about 1.6% year-on-year, down from the 75%-80% growth in Q1, and as IP cycles peak, the company will face more severe year-on-year decline pressure in the second half of the year.

According to Deutsche Bank's forecast, Pop Mart's full-year revenue in 2026 may decrease by 6% year-on-year to around 35 billion RMB, with adjusted net profit declining by 13% year-on-year to about 11 billion RMB, about 20% lower than the Bloomberg market consensus. The report believes the current share price has not fully reflected risks such as slowing revenue and weakening operating leverage.

Labubu 4.0 lukewarm response signals weakening IP momentum

The Deutsche Bank report identifies underperformance of the flagship IP Labubu's latest series as one of the key reasons behind the recent slowdown in growth.

Based on secondary market trading data, social media feedback, and offline inventory research, Deutsche Bank found Pop Mart's recently launched THE MONSTERS Hair Salon series (Labubu 4.0) has disappointed the market. Despite high pre-launch expectations thanks to FIFA World Cup exposure and Lisa's endorsement, the actual sales boost was far weaker than anticipated.

The report notes that just one week after launch, some standard Labubu 4.0 products' prices in the secondary market have dropped to about 50 RMB, markedly below the retail price of 159 RMB. Deutsche Bank believes this discount is much greater compared to other IP series, and market expectations for Labubu 4.0 were originally high. Weak pricing in the secondary market, according to Deutsche Bank, means enthusiasm from collectors and scalpers is fading, and the IP's appeal is declining.

Inventory clearance promotion spreads, discount pressure in multiple markets

Deutsche Bank also highlights that in sharp contrast to the supply shortage and sell-out launches in the second half of 2025, now signs of inventory clearance promotions are emerging in multiple markets, which poses a potential margin risk.

In China, during the recent 618 shopping festival, Pop Mart’s official Taobao/Tmall flagship stores launched tiered discounts and "lucky bags" containing various products. Deutsche Bank points out that the Labubu World Cup series was included in every four lucky bags, implying actual sales conversion was weaker than earlier expected.

In overseas markets, Deutsche Bank states similar promotional activities have spread to Indonesia, Singapore, Thailand, where IP products are bundled in lucky bags with significant discounts to clear inventory. In Europe and America, third-party retailers selling Pop Mart products generally offer around 20% direct discounts, and official stores also run promotions during major shopping festivals. Deutsche Bank believes these signs indicate that promotional pressure is now fairly universal.

Growth slows in Q2, second half forecasts missed market consensus

The bank expects Pop Mart's revenue in the first half of 2026 to reach 18.2 billion RMB, up 32% year-on-year, with adjusted net profit at 6 billion RMB, up 27% year-on-year. Q2 revenue will be about 8.3 billion RMB, only 1.6% year-on-year growth, and a 16.3% sequential decline.

By region, Deutsche Bank expects Q2 sales in China to grow 15% year-on-year, but as June's Labubu 4.0 launch fell flat and sales momentum weakened, subsequent growth could flatten or even turn negative. Overseas sales are expected to decrease by 19% year-on-year, a sharp reversal from Q1’s 40% year-on-year growth, and are down about 20% quarter-on-quarter.

Looking ahead to the second half, the report preliminarily estimates that Group revenue may decline by 35% year-on-year in Q3, and by 18% in Q4. Overseas sales in Q3 and Q4 are expected to fall by 50% and 34% year-on-year, respectively; in China, Q3 sales are expected to decline by 22%, while Q4’s drop may narrow to about 5% with the boost from year-end e-commerce festivals. Deutsche Bank’s full-year adjusted net profit forecast is about 11 billion RMB, around 20% lower than the Bloomberg consensus of 14.3 billion RMB.

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