Pop Mart’s share price has been under pressure since late 2025 amid concerns of fading popularity of Labubu and slower growth. However, we believe most concerns are overdone, and buybacks initiated by the company on 19 Jan 2026 should restore market confidence. We expect with new product launches, Labubu would still remain a key pillar for its 2026 sales, and other IPs would also pick up as overseas consumers get more familiarised with them. Hence, we remain confident that Pop Mart should maintain a robust momentum in overseas expansion, and stronger revenue/NP YoY growth of 32.8%/37.6% in 2026E. Reiterate BUY with an updated TP of HK$291.9 based on 20x 2026 P/E.
Key Factors for Rating
Investors have most concerns on Labubu and overseas expansion. Our recent discussion with investors reflected that the market mostly worried about: (1) fading popularity of Labubu, especially when compared to the peak in 2Q25, and (2) whether store traffic would see decline as the popularity of Labubu fades and other IPs may fail to monetise as expected. Given the fragmentation of the overseas market as Pop Mart accelerates its global expansion, we note that domestic investors would have higher concerns on its growth outlook when compared to 2023-2024.
Buybacks as a strong signal of Pop Mart’s confidence. On 19 Jan 2026, Pop Mart announced they have bought back 1.34m shares at HK$179.6/share. This is the first ever buyback since 15 Feb 2024, and this could be a strong signal that the Company is confident on its earnings and outlook. Based on previous pattern, Pop Mart also initiated buybacks of similar volume on 31 Oct 2023, and such buybacks last for months till 15 Feb 2024. Hence, we expect the buybacks may still be ongoing, and could last till Feb 2026 in a more bullish scenario.
Labubu remains important, but is not the only driver. We estimate that the Monsters series (Labubu included) would account for c.35% of global sales in 2025, and we expect such ratio would be maintained in 2026 if it could launch new products (such as Labubu 4.0) to lure loyal customers. So while we expect the YoY growth of the Monsters series may taper in 2026 due to a higher base, we expect other IPs, mainly Molly, Dimoo, Skullpanda Crybaby, and Hirono would contribute more growth in 2026 as the Company would likely dedicate more resources in boosting their popularity, especially in overseas markets. We see Crybaby, an IP created by Thai designer, is actually a good example for Pop Mart’s “local for local” strategy, and we expect Crybaby would succeed Labubu as a key growth driver in Southeast Asia market in 2026. We expect other markets will follow the experience of Crybaby, and local IPs could become strong drivers in 2026-27.
Overseas expansion to be more diversified and remain strong. We believe some of the market concerns would be weakening overseas expansion as consumers are likely only attracted by Labubu, hence the current high store productivity in overseas markets at c.RMB5m/month to be unsustainable. However, our channel checks suggest that overseas consumers’ repeated purchase rate remains as high as c.60%, as they continue to spend on other IPs and/or products in different format (such as MEGA and plush toys). We expect Pop Mart would continue to expand its store network in 2026, especially in the US, which would allow deeper penetration of consumers in different states and demographics. Hence, we expect Pop Mart’s total store count will reach 691 in 2026, up 115 or 17% YoY. US will be a key driver for store expansion, as we estimate they will open 30 stores in 2026, making its total store count to be 92, up 53%. We also expect average sales per store in overseas to remain intact.
Key Risks for Rating
Downside risks: (i) fierce competition and change in consumer preference; (ii) deteriorated brand equity; (iii) inability to secure popular IPs and (iv) tariff hikes and other regulatory uncertainty.
Valuation
We adjust our 2025/2026/2027 revenue by 0%/-2%/-2% and EPS by -0.5%/- 4.5%/-2.9% to factor in the moderation of Labubu craze and higher marketing expense in overseas markets.
We revised our TP to HK$291.9, based on 20x 2026E P/E (previous: 27x), which is equivalent to 0.5x PEG ratio. We apply a lower target multiple to factor in higher uncertainty on its near-term growth, which can be relatively more volatile than before and dependent on new product & IP launches. Nonetheless, we reiterate BUY as we see the current valuation is relatively attractive when its growth potential is considered.