Pop Mart’s net profit of RMB12.8bn fell 2.1% short of our expectations, primarily due to a 6.9% revenue miss offset by better-than-expected margins. Slowing overseas growth in 4Q25, coupled with a conservative 2026 revenue growth target of 20%, disappointed investors, leading to a 22.5% drop in the company’s share price on 25 March. While rising oil prices may put near-term pressure on margins, we believe Pop Mart remains on track with efficiency improvements, supply chain optimisation, and IP monetisation. These advancements will provide a strong foundation for sustainable long-term growth. In light of the company's growth prospects and the effective management execution, we consider the share price correction excessive. Maintain BUY with updated target price of HK$211.4.
Key Factors for Rating
2025 results missed expectations due to overseas growth deceleration. Pop Mart's revenue and NP increased by 185% and 309% YoY, respectively, reaching RMB37.1bn and RMB12.8bn in 2025. However, the results fell short of market expectations as overseas market growth slowed more than anticipated in 4Q25, impacted by a high base effect and the fading popularity of Labubu following its explosion in summer. In particular, revenue growth in the Asia Pacific, Americas, and Europe moderated from 1H25 YoY growth rates of 258%, 1142%, and 729%, to 123%, 633%, and 436% YoY in 2H25, respectively. On the positive side, margins in 2025 saw notable improvement. GPM and NPM rose significantly by 5.3ppts and 10.4ppts to 72.1% and 34.4%, respectively, mainly driven by a higher contribution from overseas sales, operating leverage, and flexible supply chain management.
Prudent guidance for 2026. Management has set a revenue growth target of no less than 20% for 2026, which may fall short of investor expectations of at least 30% compared to the explosive growth seen in 2025. However, instead of prioritising rapid expansion, Pop Mart intends to focus on internal improvements and views 2026 as a year of “recharging”.
Margin pressure in 2026 caused by the oil price increase. The ongoing U.S.-Iran conflict has significantly driven up oil prices and disrupted shipping in the Middle East, which is expected to pressure Pop Mart's GPM in two ways: 1) rising prices of chemical products, such as ABS and PVC, which are key materials for figure toys, as they are closely tied to oil price fluctuations, and 2) increased freight shipping costs as fuel prices soared. We expect these factors to slightly reduce Pop Mart's GPM to 70.9% in 2026. However, we believe the company is well positioned to mitigate cost pressures thanks to its strong bargaining power as the leading brand in the industry and its minimal business exposure to the Middle East.
Refining operations and expanding retail presence. The company will commit to enhance its domestic retail stores by increasing store sizes, optimising shelf displays, and improving customer experiences. Based on our estimates, the monthly average revenue per store in the domestic market doubled in 2025, reflecting the success of such strategy. In overseas markets, opening new retail stores remains key to building brand awareness and driving sales. In 2025, Pop Mart expanded into 5 new countries (Germany, Denmark, Qatar, the Philippines and Canada) while in 2026, stores may expand to second- and third-tier cities with untapped potential. For instance, we expect the store count in the US to increase from 64 in 2025 to 100 by the end of 2026, up 56% YoY. Regarding marketing initiatives, Pop Mart will continue to capitalise on global events, such as the FIFA World Cup and Macy’s Thanksgiving Day Parade in New York, to further strengthen its brand presence.
IP-centric development as the core strategy for the next five years. Pop Mart has achieved global recognition for its leading IPs, presenting significant monetisation opportunities beyond pop toys. These opportunities could extend into other consumer goods, services, and entertainment. In recent years, the company has diversified into new businesses, including jewelry (Popop), desserts (Pop Bakery), and theme parks (Pop Land). Additionally, small home appliance products and a Labubu movie are in the pipeline. To accelerate its IPcentric group development, Pop Mart has appointed Wen Deyi as the Chief Growth Officer (former co-COO), responsible for overseeing the company's global business growth strategy. While investors have raised concerns about the company's heavy reliance on The Monsters (Labubu), other IPs, such as Twinkle Twinkle, delivered surprising growth of 1,602% in 2025, increasing its contribution from 0.9% to 5.5%. Meanwhile, Dimoo, which debuted in 2019, grew by 205% in 2025, demonstrating the company’s ability to cultivate new IPs and extend the lifecycle of existing ones. We expect The Monsters’ revenue growth in 2026 to align with the overall revenue growth, while the strong momentum of other IPs will serve as the key growth driver.
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) tariff hikes and other regulatory uncertainty; and (v) commodity inflation.
Valuation
We cut 2026/27 net profit forecasts both by 15%, mainly to factor in: 1) lower margin expectations due to cost pressure and higher investment in overseas expansion and new businesses, 2) slowing revenue growth rate provided conservative guidance.
We lowered our TP to HK$211.4 (previously HK$ 291.9), based on 17x 2026E P/E (previously 20x). Our latest target multiple of 17x implies a 0.9x 2026 PEG ratio. Still, we believe the company is steadily improving the operational efficiency of its online platforms and retail stores in both domestic and international markets, optimising its supply chain, and successfully expanding its fan base. These efforts will establish a strong foundation for sustainable longterm growth.