New IP "Star People" rises rapidly, Labubu still sold out even after a tenfold increase in production capacity, JPMorgan upgrades Pop Mart to "Overweight".

New IP "Star People" rises rapidly, Labubu still sold out even after a tenfold increase in production capacity, JPMorgan upgrades Pop Mart to "Overweight".

J.P. Morgan believes that Pop Mart’s fundamentals have not changed and are in fact even stronger, while market panic has created an exceptional opportunity for allocation.

According to Trading Desk News, on October 15, J.P. Morgan released a research report, upgrading Pop Mart’s rating from “Neutral” to “Overweight,” and raising the target price from HK$300 to HK$320. This adjustment is mainly based on two key factors:

First, strong performance of popular IPs. Although Labubu’s production capacity has increased tenfold compared to Q1, Labubu 3.0 and Mini Labubu remain sold out in all regions. In addition, the new IP “Twinkle Twinkle” is rising rapidly and is expected to contribute 8% of 2027 sales.Second, significantly enhanced valuation appeal. The stock price has pulled back 24% from its August peak, while the Hang Seng Index rose 7% in the same period. Based on J.P. Morgan’s current forecast, the 2026 P/E is only 20x, making the risk-reward ratio more attractive.

The report stresses that Pop Mart has not only proven it does not rely on a single IP through the continued popularity of Labubu and the success of “Twinkle Twinkle,” but has also demonstrated its resilience to external risks with its global layout and strong pricing power.

Core Engine: Labubu, production surges tenfold yet still below demand

Labubu’s phenomenal popularity is the key engine supporting Pop Mart’s growth.

According to J.P. Morgan’s observations, even though the company has increased Labubu’s capacity tenfold compared to Q1 2025, its Labubu 3.0 and Mini Labubu series are still sold out at all sales locations. This directly dispels market concerns regarding the sustainability of demand.

Secondary market prices are a barometer for IP popularity.

Data shows that in the Halloween “Why So Serious” plush series released on October 9, the Labubu style commanded up to a 290% premium on the resale market.

Additionally, the company plans to release the “Labubu & Friends” animation in December, and launch Labubu 4.0 in March or April 2026, which will serve as future growth catalysts.

Emergence of the new star “Twinkle Twinkle”, demonstrating diversified IP matrix

Even more exciting for investors than Labubu’s sustained popularity is the successful incubation of new IPs.

Pop Mart’s new IP “Twinkle Twinkle” is quickly becoming a fresh growth driver. In the Halloween series released on October 9, products covering five IPs (Labubu, Twinkle Twinkle, Molly, Dimoo, and Hacipupu) sold out within minutes on major online platforms.

Notably, in this series, “Twinkle Twinkle” commanded a 130% premium in the secondary market, second only to Labubu’s 290%, and far higher than other IPs (-18% to +26%).

J.P. Morgan believes this indicates that “Twinkle Twinkle” is attracting its “real fan base,” rather than just being a substitute for Labubu when consumers cannot buy it.

Based on this strong performance, J.P. Morgan forecasts that “Twinkle Twinkle” will contribute 8% of total company sales in 2027, on par with established IPs like Skullpanda, Molly, and Crybaby (all expected to contribute 8–9%), while Labubu’s contribution is estimated at 35%.

This powerfully demonstrates Pop Mart’s strong IP development and commercialization capabilities, as well as the successful implementation of its long-term growth strategy through a diversified IP matrix.

Is the market overly pessimistic? Strong fundamentals, attractive valuation

Pop Mart’s stock has declined 24% from its recent peak of HK$335.40 to HK$254, while the Hang Seng Index rose 7% over the same period.

(Comparison of Pop Mart and Hang Seng Index trends this year)

J.P. Morgan believes this sharp relative underperformance shows investors have adopted overly conservative expectations.

However, the company’s fundamentals remain robust. Based on the strong sales momentum of Labubu and new IPs, J.P. Morgan has raised its earnings forecasts for 2025 to 2027 by 5–7%.

After adjustments, Pop Mart’s 2025 revenue and adjusted profit are expected to grow 165% and 276% year-on-year respectively, with 2026 figures expected to continue rising 28% and 29% year-on-year.

Supported by this strong growth outlook, Pop Mart’s projected 2026 P/E is only 20x, according to J.P. Morgan. This valuation, compared with consumer companies of lower growth quality, demonstrates a more favorable risk-return profile.

Accelerating global supply chain

Regarding investor concerns about tariff risks from global trade tensions, J.P. Morgan believes the financial impact for Pop Mart will be limited.

First, Pop Mart has already prepared inventory for the fourth quarter 2025 shopping season, able to handle short-term tariff fluctuations.

Second, the company has direct pricing power to offset rising costs. In fact, in April 2025 the company successfully raised prices overseas, increasing blind box prices by 12% (from $17 to $19) and plush toy prices by 27% (from $22 to $28).

J.P. Morgan calculates that Pop Mart only needs to raise prices by about 15% to fully offset the tariff impact on gross profit in the Americas market.

More importantly, to support long-term global expansion, Pop Mart is planning six global manufacturing centers (four in China, two overseas).

J.P. Morgan estimates that the Americas market will contribute about 21% of sales in 2025, rising to about 28% in 2027, with overseas business contributing nearly 60% of group revenue in 2027, highlighting the growing importance of global expansion.

J.P. Morgan expects that increasing tariff uncertainty will prompt the company to accelerate its global supply chain layout, fundamentally reducing geopolitical risks.

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The above content is from Trading Desk.

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