Understanding the Market | POP MART surged over 7% during trading, Morgan Stanley believes the company has the ability to raise prices in the U.S. market to mitigate the impact of tariffs

POP MART's intraday increase exceeded 7%, and as of the time of writing, it rose by 7.25% to HKD 136, with a transaction volume of HKD 780 million. Morgan Stanley released a research report stating that the impact of the U.S. tariff increase on POP MART's demand is greater than its operating profit margin. They remain optimistic about the company's long-term potential in the global market but advise against excessive optimism and ignoring macro risks. The firm believes that POP MART has the ability to raise prices in the U.S. market to mitigate the impact of tariffs, so they are not overly concerned about its operating profit margin, but are more focused on the potential global or regional economic recession caused by the tariff increase. The firm also noted that the current selling price of POP MART's basic blind box figurine model is USD 16.99. Assuming a gross margin of 75% and an import cost of USD 4.2, a 34% tariff increase from China would raise the import cost to as much as USD 5.4. To maintain a gross margin of around 75%, the product would need to be priced at USD 21.8. If the price is only raised to USD 19.99, the gross margin would drop to about 73%