Pop Mart, a threefold crime of plummeting prices

Produced by | MiaoTuo APP

Author | Duan Mingzhu

Editor | Ding Ping

Header Image | Visual China

On March 25, Pop Mart topped the hot list on various investment platforms.

On one hand, there is a remarkable report card for 2025, with revenue growth nearly doubling and net profit growth exceeding three times; on the other hand, the stock price plummeted sharply, dropping 22.51% in a single day, with a market value evaporating by about HKD 65.57 billion. By the 26th, Pop Mart’s stock price continued to decline by over 10%.

Why are the fundamentals and market sentiment at two extreme ends?

If the immediate trigger was the key indicators falling slightly below expectations, then concerns about its operational aspects (over-reliance on a single IP, slowing growth, etc.) represent the future risks that the market is focused on. Additionally, many investors are actually dissatisfied with Pop Mart’s foray into small home appliances, as this signifies a shift in its growth narrative and a contraction in its imaginative space, meaning that Pop Mart is no longer sexy.

So, how should we view these “three major sins”? Answers can be found in analyzing who is selling Pop Mart, how its operational quality is, and how to assess its valuation.

Who is selling Pop Mart?

The massive drop in stock price is clearly not caused by ordinary retail investors.

According to trading data from that day, Pop Mart’s active buy-sell ratio was 52:48, with a net active buy of HKD 494 million. This means that despite the stock price crash, there was still capital actively buying, absorbing most of the selling pressure.

The sellers on the top ten trading list for Pop Mart on the 25th were almost all foreign institutional investors, such as J.P. Morgan, Morgan Stanley, Merrill, Citigroup, and Goldman Sachs; the buyers were mainly Futu Securities, Bank of China International, and CITIC Securities. Thus, mainland southbound funds remain the primary source of bullish positions, while foreign hedge funds are the main source of bearish positions.

Image Source: Futu Niu Niu

Ironically, most of these foreign banks had generally provided very optimistic forecasts before the earnings release. For example, Morgan Stanley set a target price of HKD 325 in February, believing there was still room for growth in March-April; Citigroup raised its target price multiple times in February and March, from HKD 398 to HKD 415, and listed it as a “Top Buy” in the Chinese consumer sector; JPMorgan maintained an “overweight” rating with a target price of up to HKD 400.

In contrast, mainland institutions’ performance forecasts for Pop Mart were closer to reality.

Thus, there is a skeptical voice suggesting that these foreign banks might have “deliberately” spoken well to facilitate subsequent short selling, and it cannot be ruled out that internal company coordination might be involved in such operations. However, there is no solid evidence for this.

What is more likely is that after the earnings report was released, the market discovered some hidden worries, leading to a huge divergence in expectations:

• Revenue slightly below expectations: Annual revenue was HKD 37.12 billion, slightly lower than some market expectations of HKD 37.96 billion.

• Increased reliance on core IP: The anticipated “second growth curve” not only failed to materialize, but reliance on LABUBU also increased from 23% to 38%. The performance of established IPs like Molly was far below some analysts’ expectations.

So when these institutions realized that Pop Mart’s reality (financial report) could not support the extremely high expectations they had set, their hedge funds and other departments would trade based on the latest information and quickly withdraw.

This appears to be a result of positive news being fully priced in along with expectation adjustments.

This will lead to increased short-term volatility in Pop Mart’s stock price, and the divergence in expectations for 2026 performance (bullish investors see it at HKD 16.5-17 billion, while bearish investors believe it will decline) will need time to reconcile, with the stock price maintaining high volatility before finding a new equilibrium.

Thus, the long-term trend of Pop Mart’s stock price will still return to fundamentals, assessing how its operational quality is and how much growth potential remains.

How is the operational quality?

In fact, Pop Mart’s operational data shines whether compared horizontally or vertically: revenue in 2025 surged 185% year-on-year to HKD 37.12 billion, slightly below the market expectation of HKD 38 billion; net profit increased by 309% year-on-year to HKD 12.8 billion, slightly above the expected HKD 12.6 billion; adjusted net profit was HKD 13.08 billion, a year-on-year increase of 284.5%.

In operational details, the key is to address the market’s concerns about growth rates, which can be broken down into IP growth and channels/regions.

From the composition of IP revenue, Pop Mart has formed a “one strong, many strong” structure.

• 1 IP surpassing HKD 10 billion (LABUBU at HKD 14.16 billion)

• 6 IPs surpassing HKD 2 billion (SKULLPANDA at HKD 3.54 billion, CRYBABY at HKD 2.93 billion, MOLLY at HKD 2.9 billion, DIMOO at HKD 2.78 billion, and Xingxingren at HKD 2.06 billion)

• 17 IPs surpassing HKD 100 million

Moreover, many IPs have high growth rates, such as Xingxingren’s revenue soaring from HKD 120 million to HKD 2.06 billion in 2025, a year-on-year increase of 1602%; CRYBABY saw a year-on-year increase of 151.4%; SKULLPANDA grew 170.6% on a high base.

Looking specifically at the second half of 2025, each of Pop Mart’s main IPs saw a quarter-on-quarter increase in revenue, with LABUBU contributing about 45% of the incremental revenue, while other non-LABUBU IPs saw revenue growth of about 53%; the significantly declining proportion of MOLLY still saw a 13% rise in actual revenue.

Data Source: Pop Mart Financial Report Compilation

Therefore, rather than saying that Pop Mart’s reliance on core IPs is too high, it is more accurate to say that the core IP represented by LABUBU grew too rapidly last year. If we look at the IP lifecycle, LABUBU has exploded from its inception in 2018 to 2025, having undergone seven years of nurturing; while MOLLY is still growing; there are currently new candidates for succession, but they still need time to incubate.

The lifecycle logic of image IPs differs from that of content IPs, as it can be extended through high-frequency SKUs, category expansion, and emotional connections. Pop Mart has designed extensive operational content for LABUBU, such as launching the “truly meaningful LABUBU 4.0” series and artist collaboration series in the second half of this year, among others.

However, it must be acknowledged that 2025 is an anomalous peak for Pop Mart’s growth, and the “not less than 20% growth” target for 2026 is a healthy goal after actively slowing down.

In terms of regional revenue composition, Pop Mart’s Chinese market saw a growth rate of 134.6% in 2025, outperforming the overall consumer market, but its proportion dropped from 68.2% to 56.2%; overseas total revenue reached HKD 16.27 billion, a year-on-year increase of 291.9%, with its share of total revenue rising from 31.8% to 43.8%; the Americas and Europe saw growth rates exceeding 500%, although from a small base.

The market is particularly concerned that Pop Mart’s performance in the second half did not meet expectations, mainly due to a significant slowdown in sales growth in the Americas and Europe in Q4 compared to Q3, which triggered market worries about its growth momentum reaching a peak. During the earnings call, Pop Mart also admitted that there were indeed supply chain issues in the fourth quarter, leading to a mismatch between seasonal products and sales peak timing.

Additionally, overseas transportation and logistics costs increased by 280.3% to HKD 1.78 billion, eroding profits; inventory turnover days extended from 102 days to 123 days, increasing inventory pressure overseas.

Looking at the regional growth prospects, Pop Mart’s incremental growth in 2026 will come from offline expansion in the Americas (increasing stores from 64 to over 100), new market exploration (Middle East, South Asia, South America), and improved store efficiency in China.

If the store expansion in the Americas goes smoothly, there is still considerable growth potential. Currently, new markets contribute very little and are a source of new growth space.

In the Chinese market, however, there was only a net increase of 14 stores in 2025 (from 431 to 445), with growth mainly coming from improved store efficiency rather than new store openings. Feedback from operations indicates that upgraded store areas have generally increased by 30%-40%, with some increasing by 50%, and store efficiency is nearly double the national average. According to Pop Mart’s plans, the number of upgraded stores in 2026 will far exceed that of 2025, which can be expected to contribute to growth.

Another key piece of information is Pop Mart’s membership situation. In 2025, Pop Mart saw a net increase of 26.5 million members, 2.26 times the net increase in 2024, setting a historical high; the proportion of sales from members increased from around 90% to 93.7%, indicating that members have become an absolute core consumer group; the repurchase rate increased from about 53% to 55.7%, reaching a historical high.

The capital market is more concerned with whether Pop Mart can continue to break into new circles. According to estimates from Zhongtai Securities, its potential member base still has the potential to double, but turning potential into reality is becoming increasingly difficult, which is also one of the uncertainties for the future.

In summary, the growth sources for Pop Mart in 2026 are ranked as follows: offline expansion in the Americas, new market exploration, continued operation of LABUBU and new IP incubation, and improved store efficiency in China.

From a stock price perspective, Pop Mart’s super-fast growth in 2025 has already been reflected in its stock price, and its future will inevitably return to linear growth, which may be why capital is choosing to leave.

Of course, another very important reason is that Pop Mart is unexpectedly venturing into small home appliances!

How to value it?

It seems that small home appliances are just a part of Pop Mart’s diversified layout; why did the market react so strongly to this?

In fact, Pop Mart’s small home appliance strategy is an OEM model, covering products such as electric kettles, coffee machines, and electric toothbrushes. Essentially, it licenses its IP image to mature manufacturers, with Pop Mart handling design and branding—this is fundamentally no different from Disney’s and Sanrio’s IP licensing models. The target market is planned as “first domestic, then overseas,” rather than engaging in a price war with Midea and Joyoung by building factories.

However, the key is that this will determine what valuation evaluation system the market will use to measure Pop Mart.

If it is believed that Pop Mart essentially remains an “IP platform company,” the current valuation reflects concerns over unsustainable high growth and implicitly includes a discount for the “platform value” that has yet to be fully understood.

However, when the market downgrades Pop Mart’s valuation anchor from the 20x PE of “growth stocks” to the 15x PE of “mature consumer goods,” it indicates an attempt to value it within the framework of a “mature consumer goods company.”

Yet, crossing over into the small home appliance market means a brand that established high premiums based on “emotional value” and “scarcity” may blur its positioning if it ventures into functional, cost-effective physical goods, potentially damaging its core.

Moreover, investors may worry that this attempt itself indicates management’s uncertainty about future growth, leading to a forced search for a way out in the small home appliance red ocean; at the same time, it could divert the company’s focus, and the competition in the appliance sector is fierce. If any product faces quality issues (for example, a blind box lamp catching fire), the damage to the brand would be significant. Therefore, the market chooses to vote with their feet, avoiding the uncertainty brought about by this “ambiguous correctness.”

Some bearish investors even compare Pop Mart to Kweichow Moutai, arguing that “Moutai’s strong moat, unmatched ROE, unparalleled gross and net profit margins, and dividends exceeding fixed deposit rates justify a 20x PE,” so a company like Pop Mart, driven by IP and with high earnings volatility, should rightly be given a valuation discount. Hence, “15x PE, with a further 10% discount for Hong Kong stocks” has become their “reasonable price,” corresponding to a target price of about HKD 130.

Currently, the bulls see that IP operational capabilities have been validated, the overseas market potential is enormous, and new businesses represent new growth points. The bears see excessive reliance on a single hit product, concerns about the growth model, vague new business directions, greatly increasing uncertainties, and that the existing valuation cannot be supported.

When the bears’ “certainty concerns” outweigh the bulls’ “growth story,” the market chooses to sell until the stock price falls to a level that makes more long-term funds feel “even if there is no growth, this price is cheap enough.”

If Pop Mart needs to prove its success in IP diversification, sustained strong growth in overseas markets, and that new businesses (even small home appliances) do not harm its main business, it can not only create hits but also build an IP ecosystem capable of weathering cycles. Otherwise, the market’s valuation “discount” will continue.