POP MART: Pit stop to refuel and change tires, back on track! ---

On the afternoon of Mar 25 Beijing time, POP MART (9992.HK) released H2 FY2025 results, and the stock dropped 22% intraday. While the second-half headline numbers were broadly in line with Bloomberg consensus, they fell short of some bullish buy-side models. Beyond the print, a conservative 2026 guide further disappointed, and the two combined to trigger the afternoon selloff. $POP MART(09992.HK)

Key takeaways follow. See below.

1) Overseas revenue missed: In 2H25, POP MART delivered revenue of RMB 23.2bn (+174% YoY), with growth moderating vs. the 200%+ run-rate in H1. By split, China benefited from all-channel, refined ops with a sharp lift from online, delivering RMB 12.6bn (+183% YoY), re-accelerating vs. H1 and beating market expectations. Overseas grew 281% YoY but decelerated vs. H1, particularly in North America; relative to 10x+ growth in Q3, offline momentum weakened from Nov as refined ops lagged, and Black Friday did not show the expected spike, with growth falling below 500%, dragging the overall overseas print.

2) Faster overseas store openings. To capture LABUBU-driven traffic, the company accelerated overseas openings in 2H, adding a net 72 stores, largely in North America. It pursued a cluster strategy in core districts such as New York and Los Angeles.

Domestically, only two net stores were added in 2H, with focus on upgrades to existing locations. After increasing floor area by 30%–50%, sales per sqm roughly doubled.

3) Higher mix from The Monsters. As LABUBU capacity ramped in 2H, The Monsters mix rose from 34.7% in H1 to 40%. Legacy core IPs such as Molly and Dimoo were softer with lower mix. The bright spot: the Starman series became the fastest-growing IP, with mix rising from under 3% in H1 to 7.2%.

4) Plush contributed half of sales. By product, blind-box figurines continued to cede mix, while higher-margin plush surged. Beyond LABUBU, other flagship IPs are also shifting toward plush, lifting mix from 44% in H1 to 54%. POP BLOCK (building sets) more than doubled vs. H1 following launches like Molly Architecture and Labubu Forest, with solid momentum.

5) Online outperformed. Channel-wise, higher livestream frequency on platforms such as Douyin materially improved online conversion. In the official WeChat Mini Program, new mechanics like team box draws and scarcity probability disclosure focused and activated private-domain traffic, driving online revenue to grow 200%+ YoY, ahead of the overall base.

6) Operating leverage continued to expand. A higher contribution from more profitable overseas markets, plus a rapid rise in plush mix, lifted H2 GPM to 73%, a record high. With online mix improving acquisition efficiency, the sales expense ratio fell 600bps to 21%, and G&A was disciplined, down 400bps to 6%. Core OPM rose to 48%, a new high.

7) Guidance: On the call, management set a 2026 revenue growth target of no less than 20%. Ex-store expansion, this implies low single-digit same-store growth; in their words, a year of ‘pulling into the pit stop to refuel and change tires’.

8) Detailed financials:

Dolphin Research view:

H2 performance was not weak; at minimum, it matched our expectations. In our view, the sharp drawdown was primarily about guidance missing the mark.

POP MART is essentially an end-to-end IP incubation and distribution platform, comparable to a streaming platform like Netflix in model terms. If Netflix fears a content gap, POP MART worries about IP aging and pipeline gaps. From heavy reliance on Molly in earlier years to the relay by SKULLPANDA, Dimoo, and The Monsters, any lull without a breakout hit can quickly dent growth, much like Netflix in a ‘content-light’ year.

From this angle, The Monsters surging to 40%+ is not ideal, as any cooling in LABUBU without a comparable hit to backfill would weigh materially on results. In fact, at least in China, signals from the secondary market, search volumes, and topic heat all suggest LABUBU popularity is easing. This, in our view, is the key reason for the sharply slower guide.

To mitigate that risk, POP MART clearly accelerated its IP launch cadence from Q4 last year. While Supertutu and After-school Merodi have seen lukewarm initial feedback, the company’s industrialized ‘star-making’ engine has been proven: a steady pipeline of ideas from global artists, an internal ‘filter-test-scale’ mechanism to quickly assess IP potential, and powerful channel and supply-chain support to push winners to the fore. With stepped-up IP creation, we think the next breakout on the order of Starman is a matter of time.

On valuation, the LABUBU-driven hypergrowth phase has passed, and the model now shifts to a more ops-heavy mode to lift store productivity. Based on management’s 20% profit growth target for 2026 and RMB 15.6bn net income, the post-plunge multiple is ~13x, akin to a plain-vanilla retail comp, which looks like an overreaction.

On our math, assuming modest same-store growth (mid-single-digit overseas, low single-digit domestic) and ~50 new overseas stores per year, 2026–2029 revenue CAGR can still run ~20%. As overseas ops mature and IP creation and ops continue, a re-rate to 20x+ and HKD 312bn in market cap looks likely.

Management also flagged a 5-year focus on IP-centric group development (parks, film & gaming). Current valuation appears to exclude group optionality; any outperformance there could unlock further upside.

Detailed readout below.

I. Overseas revenue below expectations

H2 FY2025 revenue was RMB 23.24bn (+174% YoY). Overseas revenue reached RMB 10.67bn (+281% YoY), decelerating vs. H1, with mix rising from 40% in H1 to 46%.

North America: H2 revenue was RMB 4.54bn (+733% YoY), with mix rising from sub-20% a year ago to 43%. Despite deeper ties with local artists and streetwear brands and broader mainstream exposure (e.g., Thanksgiving Parade), North America remains the fastest-growing market with the highest single-store productivity (est. RMB 45–50mn per store).

However, rapid near-term store rollout constrained refined ops, and offline trends softened after Nov. Black Friday lacked the expected spike, growth fell below 500%, and overseas results were constrained.

Europe: After nearly a year of testing, H2 expansion covered core cities in the UK, France, Spain, the Netherlands, Denmark, and Belgium. Revenue reached RMB 970mn (+135% YoY), with mix approaching 10%.

APAC: Revenue was RMB 5.16bn (scope changed; no YoY provided). Growth normalized as Thailand and Singapore shifted from ‘explosive’ to ‘steady’, and the rainy season in SE Asia impacted offline footfall.

China delivered RMB 12.57bn (+183% YoY), markedly faster than H1. Drivers included a higher contribution from higher-ticket items such as LABUBU mini (RMB 99–149) and Halloween plush (RMB 199–299). Also, by broadening IP peripherals (accessories, stationery, desserts), POP MART lifted ARPU among members.

II. Overseas store openings accelerated

In H2, overseas expansion clearly picked up, with 72 net new stores, mostly in North America. This aligns with absorbing the LABUBU traffic surge.

By end-2025, North America had 60+ stores across New York, Los Angeles, Chicago, and Miami. Canada’s first store opened in Vancouver in Dec, kicking off the No. 2 market; entry into Toronto is planned in early 2026 to cover both coasts.

New H2 openings were largely standard, long-term flagship formats with larger footprints. The strategy is to capture large LABUBU-driven traffic.

Europe added 18 net stores in 2H25, also faster than H1. By end-2025, the network covered the UK, France, Germany, Italy, the Netherlands, and Spain, becoming the second growth engine overseas.

APAC added 16 stores; with a sizable base, the focus shifted to format upgrades. In Dec, POP MART opened its first store in Manila, filling the last strategic gap in SE Asia.

In China, low-efficiency community and basement stores were closed, with a shift to premium malls, cultural-tourism landmarks, and top-tier centers. Net adds were just two stores, well below overseas, as resources were reallocated abroad. This implies little room for new domestic stores, with future gains reliant on refined ops to lift store productivity.

On single-store revenue, domestic averages rose with store-quality upgrades and category expansion. We estimate H2 domestic average per-store revenue at RMB 12.76mn (+98% YoY), with both traffic and ticket size up sharply.

Overseas average per-store revenue was RMB 28.52mn (+115% YoY), narrowing the gap with China. The key driver was the much faster overseas opening pace in H2.

Overall, overseas white space remains, but stores are conversion endpoints. If product heat cools and sales slow, stores can become burdens; sustained IP heat is the core swing factor.

III. The Monsters mix moved higher

By IP contribution, as LABUBU’s 2H capacity bottleneck eased, The Monsters mix rose from 34% in H1 to 42%, a new high, making it the current key IP. Other prior core IPs like Molly and Dimoo softened, with lower mix.

Without another category breakout (e.g., blocks) or a new top-tier IP in 2026, sustaining 2025’s explosive growth will be difficult. That is the implicit risk in the mix shift.

As the core domestic push, Starman’s mix rose from 3% in H1 to 7%, with full-year revenue estimated at RMB 2.5bn. Overseas awareness is still early, and a 2026 overseas ramp should partially offset domestic growth normalization.

IV. Plush firmly the No. 1 category

Blind-box figurine mix kept falling, while higher-margin plush surged. Most flagship IPs are moving toward plush, lifting mix from 44% in H1 to 54% in H2.

Meanwhile, POP BLOCK doubled vs. H1 after launching Molly Architecture and Labubu Forest, showing healthy momentum. The category broadened the growth base.

V. Online mix rose significantly

Heavier livestreaming on Douyin and other platforms in H2 boosted online conversion. New features in the official WeChat Mini Program, such as team box draws and published odds for scarce variants, concentrated and activated private-domain traffic.

As a result, online revenue rose over 200% YoY, outpacing the broader base. The channel became a key incremental growth driver.

VI. GPM hit a record high

GPM reached 73% in H2 as higher-margin overseas mix increased and plush mix rose. Overseas GPM is roughly 10pts higher than China, amplifying the mix lift’s impact.

VII. Operating leverage expanded; profitability climbed

The sales expense ratio fell 600bps to 21% as online mix improved customer-acquisition efficiency. G&A was also disciplined, down 400bps to 6%.

Core OPM reached 48%, a record high. Profitability expansion was broad-based across mix and opex.