As the consumer market gradually shifts from material consumption to spiritual consumption, the IP derivative market is becoming the focus of global investors.
A research report released by Citigroup's Lydia Ling team on the 4th pointed out that with the rise of the younger generation's consumption capacity and their pursuit of spiritual consumption, China's IP derivative market is expected to experience tremendous growth potential. In 2022, China's retail sales of IP derivatives reached 71.5 billion yuan, and it is expected to exceed 100 billion yuan by 2027, with a compound annual growth rate (CAGR) of over 20%.
POP MART and Miniso are two star companies in this trend. POP MART focuses on IP-based fast-moving toys, attracting young consumers with its unique IP character combinations. Citigroup analysts believe that POP MART excels in IP incubation and monetization and is actively expanding into global markets, likely to maintain strong growth momentum.
Meanwhile, Miniso aims to become &#34;the world's number one IP design retail group,&#34; featuring exquisite and affordable lifestyle products, continuously strengthening collaborations with well-known IPs to drive the growth of IP product sales.
<h2>IP Derivative Market: A New Blue Ocean for Chinese Consumption</h2>
The report indicates that China's IP derivative market is in the early stages of rapid development. In 2022, the retail market size for IP derivatives in China reached 71.5 billion yuan, but per capita consumption remains at a low level compared to developed countries—America's per capita IP consumption is 61 times that of China.
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This huge gap reflects the significant potential of the IP derivative market. Citigroup expects that by 2027, China's core IP trend toy market will grow at a CAGR of over 20%, with the market size likely to exceed 100 billion yuan. This growth will be primarily driven by young consumers, especially Generation Z, whose pursuit of spiritual consumption makes IP derivatives a new consumption trend.
<h2>POP MART: The &#34;Unicorn&#34; of IP Incubation</h2>
POP MART is China's largest trend toy company and is the top recommended target in the Citigroup report.
Citigroup points out that POP MART's success lies in its strong IP incubation capabilities. The company owns over 90 proprietary or exclusive IPs, such as MOLLY, SKULLPANDA, DIMOO, etc. These IPs are not only beloved by consumers but also possess high commercial value. By collaborating with globally renowned IPs, POP MART has further expanded its market influence.
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In 2023, POP MART's revenue reached 6.301 billion yuan, with a net profit of 1.082 billion yuan and a gross margin of 61.3%. Citigroup believes that POP MART's IP incubation and commercialization capabilities allow it to stand out in a competitive market, and its global expansion and brand influence enhancement will further consolidate its market position
POP MART's business model is not limited to trendy toys. The company plans to expand the commercialization of its IP into broader fields such as theme parks, art exhibitions, and digital entertainment, which will not only bring new revenue sources to the company but also further enhance its brand value. Notably, Citi specifically mentioned the enormous potential of the &#34;Nezha&#34; IP in its research report, believing that POP MART will be one of the major beneficiaries.
With the box office success of the movie &#34;Nezha 2,&#34; the Nezha IP has become a cultural and commercial phenomenon. Citi believes that the Nezha IP has a broad audience base and emotional connection, possessing significant monetization potential for IP derivatives. Drawing on the experiences of successful movie IPs such as &#34;Star Wars,&#34; &#34;Transformers,&#34; &#34;Harry Potter,&#34; and Marvel, the sales of Nezha IP derivatives are expected to reach 0.55-4.1 times the box office revenue.
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POP MART has already launched a series of Nezha products, which have been warmly embraced by Chinese consumers. Citi believes that, with its leading position in the trendy toy industry, POP MART has the capability to create high-quality Nezha IP derivatives, thereby seizing this market opportunity.
Citi is confident about POP MART's future development, giving it a &#34;Buy&#34; rating and setting a target price of HKD 120.
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<h2>Miniso: &#34;Aesthetic of Life&#34; in IP Design</h2>
Unlike POP MART's focus on trendy toys, Miniso integrates IP design into everyday consumer goods. According to data from Euromonitor International, over the past three years, Miniso has held more than 30% market share in China's fiercely competitive branded grocery retail market (based on retail sales). Since 2016, the company has maintained the top market share.
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Citi pointed out that as one of the world's largest retailers of daily necessities, Miniso has launched a large number of IP-designed products through collaborations with internationally renowned brands such as Disney, Marvel, and Hello Kitty. These products not only offer high cost-performance but also meet consumers' pursuit of personalization and fashion.
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Miniso's strategic goal is to become &#34;the world's number one IP design retail group.&#34; The company plans to increase the contribution of IP product sales to over 50% by the end of 2028, while this ratio was over 30% in the first nine months of 2024. In 2023, Miniso's revenue reached RMB 13.839 billion, with a net profit of RMB 2.253 billion and a gross profit margin of 41.2%
Citi believes that the sales growth of Miniso's IP products and the expansion of its overseas business will bring sustained revenue growth. The company covers different consumption scenarios through various store formats (such as MINISO Land, MINISO Friends, etc.), promoting the sales of IP products.
Citi has given Miniso a &#34;Buy&#34; rating, with a target price of HKD 47.50.
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Citi stated that in 2022, the retail sales of IP derivatives in China reached 71.5 billion yuan, and it is expected to exceed 100 billion yuan by 2027, with a compound annual growth rate of over 20%. POP MART and Miniso will stand out in the competitive market with their IP incubation and commercialization capabilities

- The IP derivative market in China is experiencing significant growth potential, driven by the rising consumption capabilities of the younger generation.  
- In 2022, retail sales reached 71.5 billion RMB, with projections to exceed 100 billion RMB by 2027, reflecting a compound annual growth rate (CAGR) of over 20%.  
- Key players like Pop Mart and Miniso are capitalizing on this trend, focusing on IP-based products and expanding their market influence through strategic collaborations.

Which new consumer brands are strong in China? Citibank strongly recommends POP MART and Miniso, as the IP derivative market is about to explode!