Morgan Stanley: POP MART's longer-term scale potential has yet to be tapped by the market, and North America is expected to surpass the Chinese market

The IP craze sweeps the globe, can POP MART continue to reign?

According to news from the Wind Trading Platform, recently, Morgan Stanley analyst Dustin Wei and his team released the latest research report stating that, thanks to the viral spread of its IP products and the strong support of social media, POP MART's exponential growth in the North American and European markets far exceeds expectations.

Morgan Stanley believes that although the market has fully digested POP MART's high growth expectations for 2025, it has not fully reflected the company's long-term business scale potential. It is expected that sales will grow from USD 3.6 billion in 2025 to USD 6 billion in 2027, making it one of the fastest-growing consumer brands in the world.

The report raised POP MART's target price from HKD 224 by 35% to HKD 302, maintaining an "overweight" rating.

Global Social Media-Driven IP Product Flywheel Effect

POP MART's explosive growth overseas is mainly attributed to the driving effect of social media.

At the beginning of 2024, after Lisa, a member of the South Korean girl group BLACKPINK, showcased her POP MART collection on social media, products like Labubu quickly became phenomenon-level hits. The spontaneous promotion by global celebrities and influencers, combined with viral videos of consumers queuing outside physical stores, has propelled the brand's popularity to new heights.

Google Trends data shows that Labubu's current global search volume has reached the same level as well-known IPs like Harry Potter, Star Wars, and Disney.

The report points out that this "social ride-along effect" has allowed POP MART's penetration rate in the North American and European markets to far exceed expectations.

Labubu is just the starting point, stock price still has upward space

The report emphasizes that although global social media has driven POP MART's expansion, the initial spark of market enthusiasm was actually ignited by the Labubu series blind boxes launched at the end of 2023.

The report shows that the key to POP MART's "IP-product flywheel" theory lies in continuously launching attractive products. As POP MART's star IP, the Labubu series has a diverse product line and rapid iterations, with revenue accounting for 28% in 2024, and the fourth generation of products is expected to be launched by the end of 2025 or early 2026.

In addition, other IPs such as Molly and Dimoo also performed strongly, with many products experiencing supply shortages in both the Chinese and American markets, indicating that POP MART is not driven by a single IP; its diversified IP matrix provides it with broader growth space However, POP MART has not stopped at toys; its new businesses such as Pop Land (IP-themed park) and POPOP (fashion jewelry) are also considered important sources of long-term value increment.

The report shows that the Pop Land project in Beijing has achieved profitability, with annual revenue expected to reach 300-500 million RMB. There are plans for future expansion and the introduction of dynamic amusement facilities. Although the short-term return rate is lower than that of the toy main business, its significance as a platform for IP incubation and fan interaction is substantial.

POPOP targets the global $50 billion fashion jewelry market and, leveraging its existing 70-75% female user base and IP brand strength, is expected to gain a larger share in the European and American markets.

Morgan Stanley pointed out that these new businesses have not yet been fully priced in by the market and could be catalysts for further stock price increases.

The popularity in North America and Europe is not a "flash in the pan"

The report also adds that the expansion into North America and Europe will be a key engine for POP MART's future growth. Based on the purchasing power and market size of American consumers, it is expected that sales in the North American market will reach the level of the Chinese market by 2028-2029.

The report indicates that starting from mid-April 2024, POP MART will raise the prices of new products in North America by 80-100%, with single product gross margins expected to reach 75%. Even facing a potential 30% tariff pressure, POP MART's globalization potential should not be underestimated.

The report also states that POP MART's success internationally has revitalized its momentum domestically, as the "follow-the-trend effect" on social media has had a positive impact on global consumers.

Overall, Morgan Stanley believes that as long as POP MART can offer attractive new products, its growth sustainability will continue to bring surprises.

The report states that although POP MART's revenue is expected to reach $3.6 billion by 2025, a year-on-year increase of 100%, the market has fully priced in this growth expectation, with the current stock price corresponding to a price-to-earnings ratio of 41 times for 2025 and 28 times for 2026.