POP MART's stock price has fallen by more than half from its high of HK$339.80 last year to around HK$150. What overwhelmed market sentiment was not a single piece of bad news, but the company's lack of guidance for the first quarter after its earnings report, coupled with slightly lower-than-expected overseas sales for 2025. Subsequently, bulls significantly revised down their 2026 forecasts, rapidly narrowing the expected difference between bullish and bearish views.
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According to the &#34;Zhui Feng Trading Desk,&#34; Dustin Wei, an analyst covering Asia's consumer sector at Morgan Stanley, pointed out in a recent report that the market is pricing POP MART as if &#34;its overseas business has already failed in markets where it has just begun to penetrate.&#34; He used a sum-of-the-parts (SoTP) valuation to test this logic – deliberately adopting more pessimistic assumptions than the market, and concluded that the stock is still undervalued by about 20% at its current price, with a per-share value of approximately HK$180.
Rising inventory, pressure on overseas profit margins, and controversies surrounding new businesses are the three mountains blocking the stock's path. The severity of these three issues may be overestimated: 40-45% of overseas SG&amp;A are variable costs that fluctuate with sales and will not infinitely amplify losses; the excess inventory is estimated at RMB 1-1.5 billion, but POP MART's products do not face expiration or seasonal clearance pressures; among the new businesses, what is truly worth tracking is not the small appliance category that has drawn the most criticism, but the theme parks and the animated short film scheduled to premiere this year.
The hallmark of the sentiment pendulum swinging to an extreme is often the moment of least divergence between bulls and bears. Almost all investors now expect the overseas data for the first quarter to be poor, and the bearish logic has been fully priced in – this is precisely the core reason the report believes sentiment has bottomed out for now.
<h2>Investors Have Priced in the Worst-Case Scenario; Still 20% Upside Under Extreme Assumptions</h2>
The market's consensus expectation for the first quarter is roughly as follows: group sales to grow 50-60% year-on-year, Greater China to grow 70-80% year-on-year, overseas to grow about 30% year-on-year, but with a sequential decline of about 50% in overseas sales from the first quarter. For the full year, investors generally expect revenue growth in the low double digits, below the company's guidance of over 20%, and single-digit profit growth for the year, with a year-on-year decline in the second half. The consensus sell-side expectation for 2026 net profit is about RMB 15.7 billion, but this figure is no longer the anchor for investor decisions.
If we work backward from the current reasonable valuation of around HK$150 per share, it implies a P/E ratio of about 18 times for Greater China and 7 times for overseas business. What does 7 times imply – valuing the overseas business separately, it's only worth about $2 billion. This is a business that has established scale in multiple markets including Southeast Asia, North America, Europe, and Japan, with penetration rates in the US, Europe, and Japan still far from their limits.
Morgan Stanley's SoTP specific assumptions are: 2026 sales growth of 26% for Greater China, net margin of 34.5% (slightly below 35.1% in 2025), a P/E ratio of 22 times; overseas business sales down 30%, net profit down about 60%, net margin of only 20%, with a P/E ratio of 7 times. For the group as a whole, this corresponds to only 1% sales growth and a 12% profit decline, translating to HK$180 per share. Even calculated this way, it's still 20% higher than the current price.
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<h2>Overseas Profit Margin's Downside is Overestimated</h2>
The market's concern logic is straightforward: during high sales growth, expense ratios are diluted, and once sales decline, the pressure of fixed costs increases. However, the cost structure of the overseas business is more resilient than this concern suggests.
Overseas SG&amp;A includes platform fees for e-commerce and international logistics, which together account for 40-45%. These two items are highly correlated with online sales – the less sold, the lower these expenses naturally become.
More importantly, between the second half of 2025 and the first half, both these expense categories showed significant efficiency improvements: the proportion of the company's own website increased, bypassing third-party platform commissions; international logistics are also continuously being optimized. These changes indicate that even if overseas sales decline significantly in 2026, the degree of operating deleveraging may be much lower than the market expects.
<h2>Inventory Pressure is Manageable, Pricing Discipline Comes First</h2>
Rising inventory levels are another focus for investors.
At the end of 2025, POP MART's inventory level was RMB 5.5 billion (at cost), up from RMB 1.5 billion at the end of 2024. Inventory turnover days increased from 126 days in 2024 to 148 days in 2025, and are expected to further increase to around 179 days in 2026 – approaching the level seen during the pandemic impact in 2022.
Of this, the excess inventory is estimated at approximately RMB 1-1.5 billion, resulting from the company's overly optimistic sales forecasts for the fourth quarter of 2025 and the first quarter of 2026, made in July-September 2025. While this figure appears substantial, there are several buffers: POP MART's products have no shelf life, meaning there is no time pressure for forced clearance; cumulative inventory impairment provisions from 2021-2025 are only about RMB 50 million, which remains extremely low even after navigating the COVID years; continuous channel expansion will bring in new users, for whom existing IPs are new products; strong demand in Greater China can also absorb excess overseas inventory if necessary.
Discounting and increasing the &#34;lucky bag&#34; offerings are the quickest ways to reduce inventory, but at the cost of pricing power. The company is not currently pursuing this path (promotions in overseas markets increased in Q4 2025, but there were no systematic actions), a choice that itself indicates the company judges pricing discipline to be more important than inventory turnover speed.
<h2>Market Misinterprets New Businesses; Short Video IP Potential Overlooked</h2>
POP MART's upcoming small appliance product line has drawn market skepticism, with some investors interpreting it as a &#34;desperate move due to weak growth.&#34;
The report points out that this project has been in development for at least over a year and a half, a period when the company was experiencing exponential growth. The small appliance category is positioned similarly to the MEGA series products, targeting POP MART's top 5% to 10% core consumer group. Functionality is not the core selling point, but rather it serves as a &#34;secondary decorative item&#34; – the first product is a The Monsters series cooler, positioned as a room accessory rather than for kitchen use.
The firm acknowledges that this category has lower gross margins and longer inventory cycles, but expects the company not to push it aggressively, instead closely monitoring consumer feedback as an exploration for long-term category expansion.
What is truly more worth tracking are several other new businesses: the Pop Land theme park, POPOP trendy jewelry, Pop Blocks building blocks, and the dessert line, all of which are expected to see more substantial progress this year. Additionally, the animated shorts &#34;Twinkle Twinkle&#34; and &#34;Peach Riot&#34; are scheduled for their premiere this year. Once the animations accumulate an independent audience, the IP value will no longer solely rely on physical stores, representing a narrative that the market has almost completely excluded from its pricing.

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POP MART's stock price has halved from its peak, and the market is already pricing in the worst-case scenario. Morgan Stanley stated that the severity of three issues – rising inventory, pressure on overseas profit margins, and controversies surrounding new businesses – may be overestimated: 40-45% of overseas SG&A consists of variable costs that fluctuate with sales and will not infinitely amplify losses, and the products do not face pressure from expired or seasonal clearance sales; among the new businesses, the ones truly worth tracking are theme parks and the animated short film set to premiere this year

- Bubble Mart's stock price has dropped from a peak of 339.80 HKD to around 150 HKD, over a 50% decline, primarily due to lack of guidance post-earnings report and lower-than-expected overseas sales for 2025.  
- Despite concerns over rising inventory and fluctuating profit margins in overseas operations, analysts highlight that current pricing discounts the overseas business too severely, suggesting a 20% upside based on a valuation of approximately 180 HKD per share.  
- The market anticipates a challenging first quarter, but expectations may be overly pessimistic, as the company is expected to see growth in the Greater China region and maintain strong demand resilience.

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POP MART

POP MART Severely Mispriced? Morgan Stanley: Overseas Business "Prematurely Declared Dead" by Market, Stock Undervalued by ~20% in Most Pessimistic Scenario