POP MART: More than just Labubu

HSBC has significantly raised the target price for POP MART in its latest research report, stating that it has more than just Labubu, and the multi-IP strategy is showing results, while the price reduction of Labubu is a healthy adjustment. According to the Chasing Wind Trading Desk, HSBC upgraded the rating for POP MART in its latest report on Wednesday, raising the target price from HKD 215.50 to HKD 331.50, an increase of 53.8%, indicating a 32% upside potential compared to the current stock price. This aggressive adjustment is mainly based on the strong performance of Labubu 3.0 in overseas markets and a significant upward revision of the 2025 profit forecast. HSBC stated that the success of POP MART does not rely solely on the Labubu IP; new series releases and other IPs can also continuously stimulate consumer interest. In addition, HSBC noted that the resale prices of Labubu 3.0 are normalizing, which helps maintain the IP image, and the company's long-term growth prospects remain healthy, with a 24% upward revision of the 2025 net profit forecast. Key breakthroughs in overseas markets, multi-IP strategy showing results HSBC stated that after the launch of the Labubu 3.0 series in April 2025, it generated unprecedented attention in June through social media promotions by international celebrities and KOLs. Based on strong product momentum, HSBC raised its 2025 overseas revenue forecast by 34% to RMB 14.325 billion, expecting a year-on-year growth of 183%. Particularly noteworthy is the U.S. market, where HSBC significantly raised its revenue forecast for POP MART in the U.S. from RMB 3.547 billion to RMB 5.509 billion. Driven by the improved expectations for overseas markets, HSBC raised its 2025 net profit forecast by 24%. Research shows that the success of POP MART does not rely solely on the Labubu IP. In the Thai market and other Asian markets, these regions account for over 40% and 30% of overseas revenue, respectively. Data indicates that new series releases and other IPs can continuously stimulate consumer interest. For example, the Google search index for Crybaby (the company's fourth largest IP in 2024) surged in the one to two quarters following the peak search for Labubu. Additionally, driven by Labubu 3.0, Hong Kong and Taiwan experienced a second wave of search interest in Labubu in June 2025, further validating the sustainability of the company's IP operations. The price reduction of Labubu is a healthy adjustment, significantly raising profit forecasts After POP MART began releasing Labubu 3.0 inventory to the market on June 16, its second-hand market prices started to return to normal levels (retail price is RMB 99). HSBC believes that this normalization of resale profits is beneficial for maintaining the healthy development of the IP brand, helping to reduce speculative hoarding behavior, and the company's growth prospects remain intact. After reaching a peak of HKD 275 on June 16, the stock price of POP MART has fallen by about 10%, but HSBC believes this adjustment has not changed the company's fundamentals. Based on strong performance in overseas markets, HSBC has significantly raised its earnings forecasts, with net profit predictions for 2025 to 2027 increased by 22-24%. It is expected that the non-International Financial Reporting Standards net profit in 2025 will grow by 131% year-on-year to RMB 7.856 billion, which is 23% higher than previous forecasts. The company's current net profit forecast for 2025 is 17% higher than the market consensus, and revenue forecasts are 18% higher. The stock is trading at a price-to-earnings ratio of 30.0 times for 2026, with a PEG ratio of 1, and a compound annual growth rate of earnings per share expected to be 29% from 2025 to 2027. The new target price is based on a DCF model, using an 8.3% WACC assumption and a 3.0% terminal growth rate assumption, implying price-to-earnings ratios of 39.8 times and 31.4 times for 2026 and 2027, respectively