Pop Mart’s revenue in 1Q26 rose 75-85% YoY, roughly in line with the market expectation, but not strong enough to dismiss bears. Domestic market maintained 100-105% YoY growth while overseas growth slowed to mid-DD%. Mgmt. pointed that the elevated oil price impact on manufacturing and shipping will collectively drag GPM by 1-2ppts in 2026. With 2026 being the year lack of Labubu’s traffic tailwinds, the company targets to achieve full-year growth target through improved store image and location, IP management, and better shopping experience. We believe the company is well on track to execute its strategies and customers’ understanding of Pop Mart’s IP portfolio is deepening. Maintain BUY with TP of HK$211.4.
Key Factors for Rating
1Q26 results roughly in line with market expectations. Pop Mart's 1Q26 revenue grew 75-80% YoY, far exceeding the full-year guidance of >20%, largely attributable to the low base effect. Geographically, domestic revenue surged 100-105% YoY, while revenue in Asia Pacific, Americas, and Europe expanded 25-30%, 55-60%, and 60-65% YoY, respectively, all decelerating compared to 2H25 on the back of a rising base and the fading Labubu craze. We believe the robust domestic performance may surprise the market, while the overseas slowdown could be a modest disappointment to investors. Within the domestic market, online channels revenue surged 150-155% YoY, outpacing the 75-80% growth in offline channels (incl. retail stores and roboshops), driven by continued operational enhancement aimed at attracting new customers and improving ARPU and customer retention rates.
Clear strategies to drive long-term growth amid post-Labubu normalisation. Mgmt. indicated that, in the absence of Labubu's viral traffic tailwinds, the company will focus on reinforcing its global operational capabilities to achieve full-year revenue target. On the domestic front, strategies include continued optimisation of store image and locations, enhanced in-store consumer experience, and increased investment in online operations. In overseas, the company is pursuing a combination of store operational upgrades, new store openings, membership system development, and enriching the online shopping experience, essentially replicating the success of business model in China. Following the recent management restructuring, headquarters will assume centralised oversight of global store layout, product allocation, and IP operations — a move we view as conducive to standardising global store quality and broadening exposure to top-tier IPs beyond Labubu. Additionally, after two years of exploration, more local IP collaborations tailored to overseas consumer tastes is taking shape, which we believe represents a medium-term lever to diversify demand and reduce reliance on any single IP.
Cost headwinds expected to trim GPM by 1-2ppts in 2026. Geopolitical tensions in the Middle East have driven up oil prices, raising the cost of PVC — the primary raw material for figure toys — and packaging materials, and lifting manufacturing costs by c.3-5ppts. Combined with higher freight costs, rising tariff expenses, and a declining contribution from higher-margin overseas markets, mgmt. expects the company's GPM to contract 1-2ppts YoY in 2026, in line with our forecast of -1.2ppts. Meanwhile, rising labour costs and rental expenses may exert additional downward pressure on NPM, and we estimate Pop Mart's adj. NPM to decline 1.7ppts YoY to 32.9% in 2026. Hence, while these figures provided by mgmt. may sound bearish, we expect the market reaction should be limited.
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 maintain our TP of HK$211.4, based on 17x 2026E P/E, implying a 0.9x 2026 PEG ratio. Against a high base in 2Q-3Q26, we believe overseas growth momentum will be the key to monitor in the near term. That said, we expect continued operational refinement across all channels, store expansion in overseas markets, and the anticipated launch of new product series (e.g. Labubu 4.0 in 2H26) to provide support to revenue growth and ease investor sentiment.