Three Potential Expectation Gaps of Pop Mart

Recently, Pop Mart has faced concerns about the sustainability of its growth due to fluctuations in certain high-frequency data and discussions about prices in the second-hand market.

In a report released on January 20, Huatai Securities pointed out that the current market divergence is creating a window of valuation attractiveness, arguing that the market's pessimistic expectations have at least overlooked three key expectation gaps.

First, the decline in overseas online data is overestimated, while actual performance across all channels remains resilient. Second, the new IP lineup has taken shape, with Labubu's share dropping to 30-50% in several markets. Lastly, Pop Mart’s transformation into an IP ecosystem company (film content, theme park expansions, etc.) has not yet been priced in.

At the opening of the Hong Kong stock market on Tuesday, January 20, Pop Mart surged 10% to HK$198.60. The previous day, the company repurchased 1.4 million shares at a high price of HK$251 million, demonstrating confidence in the market.

Expectation Gap 1: The Resilience of Overseas Markets Is Masked by Single Online Data Points

According to Huatai Securities, market anxiety largely stems from tracking sales performance in online channels such as TikTok Shop.

For example, data shows that Pop Mart's Q4 sales on TikTok Shop in the US declined by about 10% quarter-on-quarter. However, this observation misses the dynamics across all channels.

In Q3, North American offline stores experienced severe shortages, resulting in an unusually high proportion of online sales, which may have reached 60-70%. Entering Q4, with increased production capacity, supply in brick-and-mortar stores was mostly restored, and sales began shifting back from online to physical stores.

Therefore, despite the decline in online figures, combined with the rebound in offline stores (a net increase of about 12 stores in North America in Q4), overall channel sales likely held steady with Q3 or even increased slightly. Maintaining such a quarter-on-quarter trend during a non-hot product season itself indicates that underlying demand is more stable than expected.

The situation is similar in Southeast Asia. In Thailand, TikTok sales indeed came under pressure, but at the same time, the company doubled its number of offline stores. The shift in sales from online to larger, better-located flagship stores is a result of channel optimization, not of declining popularity. Equating online data with overall performance would misjudge the true engine of growth.

Second-hand prices, which are a hot topic in the market, are not considered a reliable indicator of IP popularity in this report.

The previously high premium for the Labubu 3.0 series was mainly due to short-term supply-demand mismatches caused by production bottlenecks. When the company increased its plush toy monthly production from 300,000 at the beginning of the year to over 30 million by August, premium prices naturally fell back as supply and demand improved.

Pop Mart’s core business strategy is “art democratization”—making products more accessible through sufficient supply—which fundamentally conflicts with maintaining high premiums in the second-hand market. Focusing on second-hand price fluctuations may cloud the understanding of the company’s long-term strategy.

Expectation Gap 2: The New IP Lineup Is Established; It's Not Just About Labubu

Another common misconception is that Pop Mart is overly dependent on the single Labubu IP. However, internal data shows the diversification of its IP matrix is progressing faster than outside perception.

In the official flagship store on Douyin (Chinese TikTok), Labubu’s sales share dropped to about 30% in Q4, while new IPs like Star Person and Crybaby have rapidly increased their share.

This trend is even more apparent in Southeast Asia, where channel development is more mature. On Indonesia’s TikTok bestseller list, Labubu’s share has dropped below 40%, while the combined share of Star Person and Crybaby has exceeded 50%.

(Labubu sales share online in Indonesia has dropped below 40%)

In Europe and the US, the online sales share of Labubu is still high, but the report believes this reflects the stage of channel development.

(Labubu still holds a high share in online sales in the UK)

When store networks are not yet well-established, online consumers tend to “search” for popular items they already know. To “experience” and become interested in a new IP, offline scenarios are key.

As offline store expansion in Europe and the US continues, the potential of new IPs is expected to be released. In September last year, the company began recruiting artists in Europe with the intent of creating the next “Crybaby” to appeal to local consumers.

Expectation Gap 3: The Shift from Toy Seller to IP Ecosystem Company Is Not Yet Reflected in Pricing

Finally, Huatai Securities points out that the market still values Pop Mart with the traditional toy company model, closely watching monthly sales data but overlooking its critical evolution into a content-driven IP group.

Pop Mart’s content plans have entered a substantive stage. The animated series “Labubu and Friends” is in production.

Even more notable, Sony Pictures has acquired the movie adaptation rights for Labubu and invited Paul King, director of “Paddington Bear,” to lead the project.

Referring to Sanrio (parent company of Hello Kitty) as an example, after 2020, it revitalized classic IP by embracing content platforms such as Netflix and YouTube, which boosted sales of its diverse character series.

The report points out that content is expected to become a core lever for Pop Mart to break through audiences and extend the IP lifecycle in the future.

Meanwhile, the upgrade and expansion of its Beijing theme park, and attempts in new businesses such as desserts and accessories, are all building a more multi-dimensional, emotionally connected ecosystem with fans. The investment required for these initiatives—and their potential value—have yet to be reflected in the current stock price.

Analysts assign the company a 27x 2026 forecast price-earnings ratio, with the core rationale being its scarcity of business model.

The report emphasizes that Pop Mart is almost the only company globally whose core model is an “artist IP incubation and operation platform.” It has built a complete closed-loop from IP discovery, product design, supply chain management, to omni-channel sales and fan operations.

Huatai Securities is optimistic about Pop Mart’s unique business model advantages under its globalization and IP group strategies, expecting them to drive strong performance growth and establish Pop Mart as a world-class trendy toy IP leader.

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