POP MART's "explosive quarterly report," Wall Street believes "it only roughly meets the high expectations of buyers"! JP Morgan expects "profit-taking," and there are five major catalysts ahead

POP MART released a strong half-year report warning, with revenue growth exceeding 200% and net profit growth exceeding 350%. However, major Wall Street firms believe the performance "only roughly meets the high expectations of buyers." After a 60% increase in stock price over the past three months, JP Morgan expects profit-taking pressure ahead, with five consecutive catalysts worth paying attention to.

According to a previous article by Jianwen, POP MART issued a profit warning on July 15, indicating that the group's revenue for the six months ending June 30, 2025, is expected to grow by no less than 200% compared to the revenue for the six months ending June 30, 2024. The group expects that the profit during this period (excluding the fair value changes of financial instruments that have not been completed) may record a growth of no less than 350% compared to the same period last year.

On July 16, according to news from the Chasing Wind Trading Desk, Goldman Sachs stated in its latest research report that although the performance exceeded the consensus of sell-side analysts and the market, it basically meets the high expectations of buy-side institutions. At the same time, JP Morgan pointed out that this performance, although exceeding sell-side expectations by 50%, is only at the lower end of the buy-side expectation range of 4.5-5.5 billion yuan.

Considering that the stock price has risen 60% in the past three months and skyrocketed 588% in 12 months, JP Morgan expects short-term profit-taking pressure and recommends buying on dips. The bank's analysts raised the target price to HKD 340 and listed five consecutive catalysts worth paying attention to.

Additionally, based on the profit warning, Goldman Sachs has raised its earnings forecast for POP MART for 2025-2027 and increased the target price from HKD 227 to HKD 260, maintaining a neutral rating. Goldman Sachs believes that future profit growth remains key to stock price increases, mainly depending on expanding popularity beyond the Labubu IP and category expansion.

Is POP MART's performance "explosive"? Wall Street: "It only roughly meets the high expectations of buyers!"

POP MART's announcement shows that revenue in the first half of 2025 is expected to grow by no less than 200% year-on-year, meaning revenue of no less than 13.7 billion yuan, exceeding Goldman Sachs' expected 187% year-on-year growth, and further accelerating compared to the first quarter's growth of 165%-170%.

Regarding the group's profit, after deducting the fair value changes of financial instruments, net profit is expected to grow by no less than 350% year-on-year, meaning net profit in the first half of 2025 will reach 4.5 billion yuan, exceeding Goldman Sachs' expectation of 3.8 billion yuan. After deducting minority interests, the net profit margin has reached about 30%, significantly improving compared to 20% in the first half of 2024 and 26% in the second half.

JP Morgan stated in its research report that this performance exceeds the consensus expectations of sell-side analysts by 50%, and is 24% higher than JP Morgan's expectations. However, it is worth noting that it is close to the lower limit of the buy-side expectation range of 4.5-5.5 billion yuan.

As Goldman Sachs mentioned:

Although the performance is strong, reflecting the accelerated growth momentum in mainland China and overseas markets, as well as robust profit margin expansion brought about by geographical structure and operational leverage, buy-side expectations have already risen, and the performance results roughly meet the optimistic expectations of buyers. **

JP Morgan warns of profit-taking risks, focusing on five continuous catalysts

Despite strong performance, JP Morgan remains cautious about short-term stock price trends. Data shows that POP MART's stock price has risen 60% in the past three months and surged 588% in the past 12 months, far exceeding the Hang Seng Index's increases of 15% and 39% during the same period.

JP Morgan expects that after such a significant rise, some investors may choose to take profits, which could create short-term pressure on the stock price.

However, the bank's analysts remain optimistic about the company's long-term investment logic, including strong IP operational capabilities (global super IPs, animation, theme parks, and licensing) and IP monetization capabilities (regional and category expansion), recommending investors to buy on dips.

More importantly, JP Morgan has listed five continuous catalysts worth paying attention to:

Two newly opened "POPOP" jewelry stores will sell more Labubu products, along with SkullPanda, Molly, and Dimoo;

The first season of the "Labubu & Friends" animation will premiere in the summer, featuring 20 episodes of 2-minute videos spread across social networks, expected to coincide with new product launches;

Labubu x Uniqlo T-shirts will be launched in August;

Labubu 4.0 preview/release is expected to be launched before the Christmas/Spring Festival holidays;

Possible launch of interactive/AI toys;

Goldman Sachs and JP Morgan both raise profit forecasts

Based on POP MART's strong performance in the first half of the year, Goldman Sachs and JP Morgan have both raised their profit forecasts for the company.

Goldman Sachs stated in its report that the strong performance in the first half of the year demonstrates POP MART's ability to expand the popularity of its IPs (especially the Labubu IP) into global markets, including large markets like North America and Europe.

Based on profit warnings, Goldman Sachs has raised its adjusted net profit forecasts for 2025-2027 by 15%-22%. For 2025, Goldman Sachs now expects revenue and adjusted net profit to grow by 152% and 213%, reaching RMB 32.8 billion and RMB 10 billion, respectively. Specifically:

• 2025 revenue forecast: raised from RMB 29.4 billion to RMB 32.8 billion (an increase of 11.7%)
• 2025 net profit forecast: raised from RMB 8.2 billion to RMB 10 billion (an increase of 22.2%)
• Gross margin forecast: 70.0% in 2025, 70.4% in 2026, 70.6% in 2027
• Operating profit margin forecast: 41.3% in 2025, 41.6% in 2026, 41.5% in 2027

Goldman Sachs raised its target price from HKD 227 to HKD 260 (based on an unchanged 25 times 2027 price-to-earnings ratio, discounted to mid-2026), but maintained a neutral rating, as the implied upside potential of the target price is limited, with the current stock price at HKD 263.20 JP Morgan believes that the significant expansion of POP MART's net profit margin is mainly attributed to three aspects:

First, the contribution of overseas business has increased, which enjoys higher gross margins and operating profit margins; second, economies of scale are gradually becoming apparent; third, continuous product cost optimization and strengthened expense control.

Based on the strong performance in the first half of the year, JP Morgan has raised its earnings forecast, specifically:

• The revenue expectation for 2025 has been raised from 28.011 billion yuan to 30.385 billion yuan
• The adjusted earnings per share have been raised from 6.10 yuan to 7.15 yuan
• It is expected that revenue and net profit will grow by 133% and 201% respectively in 2025
• The compound annual growth rates for 2025-2027 are 23% and 25% respectively

Based on the upward revision of the earnings forecast, JP Morgan has raised the target price for POP MART from HKD 330 to HKD 340, maintaining a "Buy" rating. This target price is based on a 1.5 times PEG valuation, equivalent to a projected price-to-earnings ratio of 34 times for 2026