Pop Mart reported surprisingly solid 2024 results, with revenue and net profit surging 107% and 375% YoY, respectively, driven primarily by exponential growth in overseas markets. The company announced ambitious 2025 guidance, targeting: 1) 50% revenue growth and 2) a doubling of overseas revenue, especially with a robust growth in the US market. We believe these targets are achievable, given Pop Mart's proven ability to develop new IPs and diversify its product offerings beyond blind boxes related to IPs such as Molly and Labubu. We also expect it could sustain strong overseas sales growth by deploying more iconic flagship stores and dedicating more resources to boost sales on e-commerce and TikTok livestreaming. We raised our TP to HK$192.10 and reiterate BUY.
Key Factors for Rating
2024 results a strong beat. Pop Mart delivered impressive 2024 results, with revenue surging 107% YoY to RMB13,038m, driven by explosive growth in overseas markets (+375% YoY). Net profit rose 189% YoY to RMB3,125m. The greater contribution from overseas business (39% of total revenue) and stringent cost controls boosted GPM by 5.5ppts to a record-high 68.5%. The domestic segment also performed strongly, with revenue growing 52% YoY, supported by improved retail store efficiency (same-store sales +28% YoY), refined display and management of online platforms (online revenue +77% YoY), and accelerated membership growth.
Ambitious 2025 guidance but likely achievable. Mgmt. has set aggressive 2025 targets, including: 1) over 50% YoY group revenue growth, reaching RMB20bn; 2) overseas revenue more than doubling, contributing over 50% of total revenue; and 3) sustained GPM expansion. Management remains confident in achieving these goals, citing better-than-expected YTD performance, with 1Q25 revenue potentially growing 100% YoY.
Overseas markets continue to be the core growth driver. Specifically, Pop Mart plans to roll out 100 new retail stores outside mainland China in 2025, highlighting more flagship stores in landmarks worldwide. The US and Europe are key focus areas, with the US market is expected to contribute c.RMB2.5bn in revenue this year (c.22% of total overseas revenue, by our estimates). Supported by localised management teams, Pop Mart aims to launch new initiatives, including POPOP stores, while benefiting from growing brand recognition. E-commerce is also a key focus of the company, as the contribution to overseas has reached 34% by Dec 2024 already, a big leap over Jan 2024 (14%). We believe the increasing contribution of overseas business will enhance both GPM and OPM, driving faster bottom-line growth.
Innovative Product Categories and enriching IP portfolio. Pop Mart has showcased remarkable innovation in product categories and the cultivation of new IPs. In 2024, CryBaby generated RMB1.2bn in revenue (+1,537% YoY), contributing 8.9% of total revenue, while Twinkle Twinkle, launched in 2024, quickly gained popularity. The jewelry store brand POPOP also delivered solid sales and is set to expand further. Additionally, Pop Mart has reduced its reliance on figure toys, with their revenue contribution declining from 76% in 2023 to 53% in 2024, creating a more balanced category mix. The company will continue to diversify with plush toys and building blocks, broadening its fan base. We view this diversification positions Pop Mart well for sustained growth, even as demand for Labubu products may taper in the coming years.
Key Risks for Rating
Downside risks: (i) fierce competition and change in consumer preference; (ii) deteriorated brand equity; (iii) inability to secure popular IPs; (iv) regulatory uncertainty; (v) overseas expansion uncertainty; and (vi) commodity inflation.
Valuation
Given the strong beat of 2024 results, we revised up our 2025/26 core net profit forecasts by 60%/67%, mainly to factor in 1) successful overseas expansion and rising brand recognition; 2) improved retail store management, strong online sales, and same-store sales growth; 3) bullish 2025 guidance and operating leverage.
We raised our TP to HK$192.10, based on 40x 2025E P/E (previous: 24x), as we see steady footprint in overseas markets and stronger brand recognition among global consumers. We believe Pop Mart deserves valuation parity with Sanrio (8136 JP, NR), given their shared focus on IP-driven products and substantial overseas revenue. Our latest target multiple of 40x implies a 0.5x 2025 PEG ratio. Reiterate BUY.