Don't want to be the "second POP MART," is 52TOYS' IP story sexy enough?

The trendy toy sector is about to see another company go public.

Recently, 52TOYS submitted its prospectus to the Hong Kong Stock Exchange, aiming for an IPO. If successful, 52TOYS will become the third trendy toy company to go public after POP MART and Blokus.

In the prospectus, 52TOYS claims to be the "third-largest IP toy company." According to the projected GMV for the domestic market in 2024, 52TOYS holds a market share of 1.2%, ranking third.

Looking at the financial indicators, 52TOYS's performance is not particularly impressive. The prospectus shows that 52TOYS is expected to generate revenue of 630 million yuan in 2024, a year-on-year increase of about 30%; however, the company has yet to turn a profit, with a projected loss of 122 million yuan in 2024, resulting in a loss rate of 19.3%.

More importantly, 52TOYS's IP competitiveness is also under scrutiny.

Image source: 52TOYS official Weibo

The prospectus reveals that the sales revenue from the company's own IP was 132 million yuan in 2022, 130 million yuan in 2023, and is projected to be 154 million yuan in 2024. The sales share has decreased from 28.5% in 2023 to 24.5% in 2024, indicating a continuous decline in the proportion of sales from its own IP.

This is not a good sign for 52TOYS. In the trendy toy sector, the success of POP MART has already validated that IP is a moat. To some extent, failing to protect IP means failing to safeguard the lifeline, which is also a significant reason for the brand's losses.

From an industry perspective, the uniqueness of the trendy toy market lies in its "large size and low concentration." According to Guosen Securities, the CR5 share of China's trendy toy industry is less than 25%. Even POP MART, with only an 8.5% market share in the domestic market, indicates that while it is a leader, it does not dominate the market entirely.

On the other hand, while the industry scale is expanding, the fact that the industry's golden period is gradually fading is undeniable. How much of the cake is left for 52TOYS depends on its own differentiated positioning.

From the very beginning, 52TOYS founder Chen Wei clearly stated that he would not create a "second POP MART." As homogenized competition intensifies, 52TOYS attempts to carve out a market niche through differentiated strategies, from IP operations to sales channels, from product innovation to market layout. How far this path of differentiation can go remains a question mark.

Relying on licensed IP, what is 52TOYS's imagination worth?

The trendy toy sector is extremely hot.

On May 22, POP MART's stock price reached 229 HKD per share, with a market capitalization exceeding 300 billion HKD, hitting a historical high. In less than two months, POP MART's stock price surged by 58.64%, and its market value rose accordingly Since the beginning of this year, POP MART's popularity has once again ignited the entire sector. In less than half a year, other players in the trendy toy sector have successively announced their plans to go public.

On May 23, 52TOYS' parent company, Beijing Lezi Tiancheng Cultural Development Co., Ltd., submitted its listing prospectus to the Hong Kong Stock Exchange, with Citigroup and Huatai International as the sponsors.

As they stand at the doorstep of the Hong Kong Stock Exchange, beyond financial indicators, capital considerations are more about the brand's imagination. As a trendy toy brand, IP undoubtedly supports the key to imagination.

Unlike POP MART's proprietary IP, 52TOYS has taken the path of "proprietary IP + licensed IP" from the very beginning, with the latter being the main source of revenue.

The prospectus shows that over the past three years, the sales proportion of licensed IP for 52TOYS has increased year by year. The sales figures for licensed IP products from 2022 to 2024 are 233 million yuan, 286 million yuan, and 406 million yuan, accounting for 50.2%, 59.3%, and 64.5% of total revenue, respectively.

Among them are internationally renowned IPs such as Crayon Shin-chan, Tom and Jerry, and Doraemon. According to data from ZhiShi Consulting, in 2024, based on GMV, 52TOYS' Crayon Shin-chan and Tom and Jerry product series rank among the top in China for similar IP products. By the end of 2024, 52TOYS will have 80 licensed IPs.

As the submission of the prospectus approached, 52TOYS further expanded its "circle of friends" for licensed IPs. On May 12, Wanda Film's wholly-owned subsidiary Ying Shiguang and its affiliate Ru Yi Xing Chen jointly invested in 52TOYS, with a total investment of 144 million yuan from both parties.

Wanda Film's announcement emphasized that both parties intend to engage in strategic cooperation in the development and sale of IP toy products, marketing, and other related fields. The strategic cooperation includes channel cooperation, brand promotion cooperation, and IP cooperation, among others.

It is foreseeable that through cooperation with Wanda, 52TOYS can prioritize obtaining licenses for high-quality film IPs, developing popular movie character images into toy products, and quickly opening up the market by leveraging the popularity of film IPs. As early as 2023, 52TOYS took the lead in collaborating with "The Wandering Earth 2," launching several transforming mech toys, including Ben Ben, 550W, and 550C, as well as Framer, which attracted widespread market attention.

Source: 52TOYS Prospectus

However, a large proportion of licensed IP means that substantial payments must be made to the IP parties, directly impacting its financial performance. According to the prospectus, in 2024, 52TOYS' IP licensing costs will reach 45.755 million yuan, accounting for 12.1% of sales costs and approximately 7.26% of overall revenue. In terms of gross margin, 52TOYS' gross margin for 2024 is 39.9% So far, 52TOYS has not achieved profitability.

In addition, compared to self-developed IP, licensing IP provides brands with more choices while also weakening their position in IP discourse. Especially when issues arise with the licensor, the production of 52TOYS's products will naturally be affected.

The current market for trendy toys is highly competitive and fragmented, with even POP MART occupying less than 10% of the market share. Referring to POP MART, whose stock price has experienced a roller coaster ride since going public, it is not easy for 52TOYS to stabilize itself and break through in the market.

Weak Self-owned IP, 52TOYS Urgently Needs to Catch Up

Differentiation is the story that 52TOYS has always wanted to tell.

In the prospectus, 52TOYS dedicates a large portion to discussing the "IP Hub" strategy, focusing on achieving differentiation through a diverse range of categories. Specifically, compared to POP MART, which primarily focuses on blind boxes, 52TOYS covers a wider range of categories, including blind boxes, transforming mechas & assembly, movable dolls, Qiaoshi Le, super activation, and six major product lines of derivative peripherals.

Indeed, a rich variety of categories does not necessarily mean differentiation; ultimately, it still relies on IP to speak for itself. For 52TOYS, enhancing the attractiveness of its IP cannot avoid the development of self-owned IP.

Currently, 52TOYS has 35 self-owned IPs, including Beast Box, Fat Da Young, and Sleep. Among them, the sci-fi series "Beast Box" has performed outstandingly, launching over 160 SKUs with a cumulative GMV of 190 million yuan, and has expanded into cross-industry content such as comics and novels.

Image source: 52TOYS official website

However, in terms of GMV, the prospectus shows that among licensed IPs, the top GMV is Crayon Shin-chan, which has reached 600 million yuan. In contrast, there is a significant gap between the two.

This reflects, to some extent, the insufficient competitiveness of 52TOYS in self-owned IP, which directly affects its financial metrics. Referring to the industry, the creation of self-owned IP can give brands higher brand recognition and user loyalty, allowing companies to better control the design, production, and sales processes, reduce costs, improve gross margins, and enhance market competitiveness.

In short, only self-owned IP can enhance exclusive competitiveness and strengthen brand awareness.

52TOYS is also aware of this. In the prospectus, 52TOYS stated that the ability to commercialize self-owned and licensed IP is also crucial for the company's business. It also mentioned risks—economic benefits generated by new IP may not meet expectations or may not offset the IP licensing costs associated with licensed IP or the R&D costs associated with self-owned IP. Any failure to achieve commercialization of self-owned and licensed IP may have a significant adverse impact on the company's future prospects, business, operating performance, and financial condition It is worth noting that the lack of proprietary IP has also affected 52TOYS's brand recognition and brand image. Under the licensed IP model, collaborations are often not exclusive, and IPs like Sanrio and Strawberry Bear can be found in many trendy toy brand stores.

When consumers can also purchase similar IP products in other brand stores, 52TOYS lacks a distinctive label, which also affects user repurchase rates.

Overall, creating a successful proprietary IP requires long-term investment and meticulous operation, from the design of the IP image, the creation of story content, to market promotion and fan interaction, all of which need to be executed to perfection. 52TOYS has a lot to learn.

IP Play is the Key to Differentiation

In the trendy toy industry, 52TOYS is not a newcomer. At the end of the millennium, 52TOYS founder Chen Wei opened a toy store in Beijing's Gulou, with a keen interest in toy collecting.

In the following decade, Chen Wei secured agency and distribution rights for international toy brands such as Hasbro, McFarlane TOYS, and BANDAI, laying the foundation for 52TOYS's distribution channels.

The emergence of 52TOYS is also in line with the thinking of many retail brands. As the consumer market changes, consumers are increasingly migrating online, impacting offline retail formats, and offline store owners are also shifting their focus.

Source: 52TOYS Official Weibo

Narrowing the focus, when talking about 52TOYS in the trendy toy industry, the market inevitably thinks of POP MART.

Whether it is the founder's early experiences or the chosen entrepreneurial path, 52TOYS and POP MART share some coincidental similarities. Because of this, 52TOYS has been compared to POP MART from the very beginning.

However, Chen Wei does not mind being compared; in his view, 52TOYS will not become "the second POP MART." Because 52TOYS has its own differentiated positioning—collectible toys, which is the biggest difference from POP MART, which focuses on trendy toys.

Collectible toys cover a wider range of toy categories. In Chen Wei's view, blind boxes are entry-level collectible toys, while collectible toys can embody more diverse styles, themes, and cultures, with a rich variety of product forms, including mechas, transforming toys, and action figures.

This also responds well to the earlier mention of product diversification.

In addition, 52TOYS has also differentiated itself in terms of its user base. Chen Wei previously revealed that 52TOYS's user age range is broader, and the proportion of male users is higher.

Among them, the sci-fi IP centered around Beast Box primarily targets the male market. According to the prospectus, there are a total of 288 SKUs of Beast Box available for sale, including transforming mechas, building toys, static dolls, movable dolls, collectible cards, commemorative medals, and keychains More importantly, in terms of IP play, it is key for 52TOYS to "not become the second POP MART."

Compared to POP MART's blind boxes and urban amusement parks, 52TOYS focuses on developing partnerships outside of films and games, such as museums, amusement parks, and tourist attractions as mainstream derivative product sales scenarios.

Currently, the "Beast Box" series features characters based on dinosaurs, wild animals, and insects, which are popular among teenagers and animal lovers, and have been introduced to Chimelong Resort, Haichang Ocean Park, and the China Science and Technology Museum.

Targeting the cultural tourism market, 52TOYS has also launched the "Super Activation" series, which means "beyond tradition, activating history, and inheriting culture." In 2021, 52TOYS successively launched products such as "Super Activation Series: Radiant," "Super Activation: Stories of Women in Daily Office Life," and "Horse Treading on Fat Swallows," integrating historical and cultural elements and images like Tang Dynasty women, Sanxingdui, and Terracotta Warriors.

Image source: 52TOYS prospectus

It cannot be ignored that trendy toy brands emphasize interest consumption, and creating an immersive experience for consumers is very important, which can stimulate consumers to place orders to some extent. Brands like POP MART and TOP TOY not only open stores in more core areas of cities but also have trendy decorations.

In contrast, 52TOYS relies more on distributor channels, and its core self-operated stores are somewhat lacking. During the reporting period, 52TOYS had 19, 15, and 10 self-operated stores in China, respectively. This is still a long way from the more than 100 self-operated brand stores that 52TOYS plans to open in mainland China within three to five years.

From the current effectiveness of its play, although 52TOYS's IP play gives it a certain competitive advantage in the market, the advantage is not obvious. The path to this listing will depend on how it strengthens its IP moat and whether it can quickly and accurately identify its core advantages to support its growth.

"52" is a homophone for "I love," and the meaning of "52TOYS" is "I love toys." At its inception, Chen Wei wanted to create "Transformers" for the Chinese people. If it successfully goes public, it will be one step closer to Chen Wei's dream of creating "China's Transformers."

Connecting Insight, original title: "Not wanting to be the 'second POP MART,' is 52TOYS's IP story sexy enough?"

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The market has risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account individual users' specific investment goals, financial conditions, or needs. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investing based on this is at one's own risk