Core Viewpoint - The resurgence of Pop Mart challenges the traditional investment beliefs held by fund managers, particularly in the context of the consumer sector, as it has outperformed traditional liquor stocks during a period of consumer stock decline [1][8]. Group 1: Company Performance - Pop Mart's market capitalization reached HKD 148.8 billion, with a stock price increase of over 10 times from its low point and more than 4 times since the beginning of 2024 [2][6]. - The company reported a revenue of CNY 4.56 billion for the first half of 2024, a year-on-year increase of 62%, and an adjusted net profit of CNY 1.02 billion, up 90.1% [2][3]. - The success of Pop Mart is attributed to its strong IP incubation and operational capabilities, particularly highlighted by the sales of its "Nezha 2" series, which exceeded CNY 10 million within eight days of launch [1][2]. Group 2: Market Dynamics - The traditional consumer sector, particularly liquor stocks, has seen a decline, with many companies reporting poor earnings forecasts for 2024, such as a projected net profit drop of 97.26% for Jiu Gui Jiu [8][9]. - In contrast, Pop Mart's performance indicates a shift in consumer preferences towards emotional consumption, particularly among the Z generation, which is becoming a significant market force [11][12]. Group 3: Investment Trends - Fund managers have largely missed the opportunity to invest in Pop Mart during its rebound, with many exiting their positions during periods of stock price decline [4][6]. - The investment community is beginning to recognize the potential of emotional consumption and the importance of understanding the spending habits of younger consumers [11][12]. - There is a growing consensus that capturing phase-based growth opportunities will be crucial for future investments in the consumer sector [9][10]. Group 4: Future Outlook - The focus for future investments will likely include sectors characterized by emotional consumption, rational industry order, and opportunities for international expansion [13][14]. - The rise of the Z generation is expected to drive demand for products that offer emotional satisfaction, such as IP-based and cultural creative products [12][13].

Core Viewpoint - The resurgence of Pop Mart challenges the traditional investment beliefs held by fund managers regarding established consumer stocks like liquor brands, highlighting a shift towards new consumption trends driven by the Z generation and emotional spending [1][9]. Group 1: Company Performance - Pop Mart, known as the "first stock of trendy toys," achieved a market capitalization of HKD 148.8 billion, marking a significant recovery from a previous decline where its market value dropped over 90% [1][5]. - The company's stock price rebounded more than 10 times from its lowest point, with a growth of over 4 times since the beginning of 2024 [1][7]. - In the first half of 2024, Pop Mart reported revenue of CNY 4.56 billion, a year-on-year increase of 62%, and an adjusted net profit of CNY 1.02 billion, up 90.1% [2][3]. Group 2: Market Trends and Investment Opportunities - The success of Pop Mart is attributed to its strong IP incubation and operational capabilities, allowing it to quickly adapt to market changes and consumer demands [2][3]. - The rise of emotional consumption among the Z generation is becoming a critical factor in investment strategies, with a focus on capturing the potential of this demographic [13][14]. - The IP economy is gaining traction, with companies that can effectively leverage IP across the entire value chain expected to thrive [3][11]. Group 3: Fund Manager Sentiment - Many public funds missed the opportunity to capitalize on Pop Mart's rebound due to skepticism about the sustainability of its growth and a preference for traditional consumer stocks [4][8]. - The consensus among fund managers regarding Pop Mart remains low, with only a few maintaining significant positions during its recovery phase [7][8]. - The investment behavior of seasoned fund managers tends to be conservative, often leading to missed opportunities in emerging consumer sectors like trendy toys [8][9]. Group 4: Traditional Consumer Sector Challenges - In contrast to Pop Mart's recovery, traditional consumer stocks have struggled, with many experiencing stagnant growth and declining valuations [9][10]. - The performance of established consumer brands, such as liquor companies, has been lackluster, with many trading at near five-year lows [10][11]. - The shift in consumer behavior towards emotional and experiential spending is reshaping the landscape of the consumer sector, necessitating a reevaluation of investment strategies [14][15].

Company Analysis - Citigroup initiates coverage on Pop Mart with a "Buy" rating and sets a target price of HK$105 [1] - Pop Mart is recognized as China's largest trendy toy company with strong IP incubation and monetization capabilities [1] - The company's IP commercialization is expected to expand beyond the toy sector, capturing the "spiritual consumption" demand of young consumers [1]

Summary of Conference Call Notes Industry Overview - The conference call focused on the IP (Intellectual Property) industry, particularly the collectible toy sector, with a specific emphasis on the company Pop Mart [1][2][3] - The IP industry is experiencing a significant upward trend, characterized by high urgency and strong consumer demand, particularly in the sub-segment of secondary products related to the two-dimensional culture [2][4][8] Key Insights and Arguments - The IP industry is seen as a rare and high-demand segment within the broader consumer market, with strong random consumption attributes among its target demographic [2][3] - The market for collectible toys, particularly those enhanced with IP, is projected to grow at an annual rate of over 20%, potentially exceeding 100 billion yuan by 2026 [15] - Pop Mart holds approximately 8.5% market share in the domestic collectible toy market and has demonstrated strong capabilities in IP design, acquisition, and monetization [13][15] Company-Specific Highlights - Pop Mart has expanded its product categories beyond blind boxes, including new lines such as building blocks and card games, with blind boxes now accounting for less than 60% of revenue [16][22] - The company has seen a significant increase in overseas revenue, which is expected to reach nearly 30% by mid-2024, indicating successful international expansion [16][19] - The management team and governance structure of Pop Mart are stable, contributing to consistent revenue and profit growth [16] Financial Performance - Pop Mart's sales revenue has shown a rapid growth trend, with a notable increase in both domestic and international channels [16][18] - The top five IPs contribute approximately 60% of total sales, showcasing the company's strong long-term IP management capabilities [17][18] Market Dynamics - The demand for two-dimensional culture-related products, such as figurines and collectibles, is driving growth in the IP sector [4][7] - The industry is characterized by a relatively short supply chain, with a focus on IP creation and operation at the top, product development in the middle, and various sales channels at the bottom [8][9] Potential Risks and Considerations - While the long-term outlook for IP value is positive, the short-term market may require time for certain stocks to mature [10] - The company faces challenges in maintaining a competitive edge in a rapidly evolving market, particularly as traditional industries adapt to incorporate IP [9][10] Additional Important Points - The conference highlighted the importance of member engagement and retention, with Pop Mart's membership numbers steadily increasing due to effective IP management and product design [20] - The company has successfully navigated the challenges posed by the pandemic, leveraging its strong IP portfolio to enhance consumer engagement and sales [11][12] Conclusion - Overall, the IP industry, particularly through the lens of Pop Mart, presents significant growth opportunities driven by strong consumer demand and innovative product offerings, with a projected substantial increase in revenue and market presence in the coming years [24]

Summary of Conference Call on the Rise of the "Guzi Economy" and the "Bubble Mart" Phenomenon Industry Overview - The "Guzi Economy," which encompasses the market for peripheral products related to entertainment, is not a new concept and has rapidly developed under the emotional value-driven consumption of Generation Z, with a market size expected to exceed 130 billion yuan by 2026 [1][5] - The distinction between the Guzi Economy and "潮玩" (trendy toys) lies in product size, price, target demographics, and consumption drivers, with the former targeting younger consumers and the latter appealing more to mature white-collar women [1][3] Core Insights and Arguments - The Guzi Economy meets the emotional needs of young consumers, providing them with collectibles and social value, while the blind box mechanism increases purchase frequency, although regulatory compliance is a concern [1][4] - Companies like Alibaba Cloud and Roundtable Holdings have reported strong revenue growth from the licensing and sales of peripheral entertainment products, confirming the industry's robust development trend [1][6] - The value chain of the peripheral entertainment industry includes upstream IT technology, midstream product development, and downstream sales channels, with IP licensing being a core component [1][7] Market Dynamics - The market for secondary derivative products is projected to reach over 130 billion yuan by 2026, driven by generational shifts in consumption, the popularity of Japanese manga and games, and the transformation of offline malls to attract foot traffic [1][5] - The financial performance of companies in this sector reflects the industry's heat, with Alibaba Cloud's retail revenue from IT products growing over 40% and Roundtable Holdings' overseas merchandise licensing revenue increasing by 35% [1][6] Product Development and Production - The product development process focuses on acquiring unique external IPs for design, with most companies opting for OEM partnerships due to low production costs [1][8] - The card product market has a significant profit margin, with a typical pack costing around 10 yuan and production costs being minimal, leading to substantial profit potential [1][10] User Demand and Competitive Landscape - Card products cater to user needs for collection, social competition, and status signaling, with some rare cards fetching high prices in secondary markets [1][11] - The competitive factors in this industry include distributor channels, blind box mechanics, and the acquisition of classic IPs, with companies like Card Friend leveraging strong distributor networks for high profitability [1][12] Sales Channels and Business Models - There are notable differences in sales channels between Bubble Mart and Card Friend, with Bubble Mart relying more on self-operated stores while Card Friend depends heavily on a vast distributor network [1][13] - Bubble Mart's business model focuses on incubating designer IPs and extending the life value of IPs through brand development, while Card Friend's model is more reliant on external IPs and distributor networks [1][14] Future Trends and Investment Outlook - The card industry must address the replicability of its business model and compliance with regulations concerning underage consumers, with companies like Card Friend transitioning towards self-owned stores and proprietary IPs [1][15] - The peripheral entertainment industry shows real and sustainable growth potential, with companies like Bubble Mart demonstrating significant profitability, indicating long-term investment value [1][17] - Investors are advised to consider market risk tolerance and liquidity when seizing investment opportunities in this sector [1][17] Notable Companies - Bubble Mart is highlighted as a leading company in the peripheral entertainment sector, with strong performance in both domestic and international markets, alongside other notable firms like Shanghai Film and Reading Group, which have rich upstream IP reserves [1][16]

Summary of Conference Call Notes Industry Overview - The discussion revolves around the **IP (Intellectual Property) and collectibles industry**, particularly focusing on the **trends in the Chinese market** and the performance of companies like **Pop Mart** and **Kailu** [1][2][3][19]. Key Points and Arguments - The industry has seen a shift from **expectations to reality**, with companies like **Pop Mart** demonstrating strong performance even in less liquid market conditions [2]. - The **collectibles market** is characterized by products that provide emotional value, appealing to different generations' consumption habits [2]. - The **definition of collectibles** includes a wide range of products such as comics, animations, games, and merchandise related to popular IPs [3][4]. - The **core user demographic** for collectibles primarily includes students and young adults aged 18-40, with a significant focus on female consumers in urban areas [5][6]. - The **market size for collectibles** is projected to reach **130 billion yuan by 2026**, indicating a robust growth trajectory for the industry [7]. - The **sales channels** for companies vary, with some relying heavily on distributors while others focus on direct sales through self-operated stores [17][19]. Financial Performance - **Kailu** reported an **80% revenue growth** in 2022, reaching **4.1 billion yuan**, with a profit margin of **39%** [12]. - The **profitability of card products** is notably high, with gross margins reaching **71%** and net profit margins up to **43%** [16]. - The **revenue growth** for companies like **Pop Mart** is stable, while others may experience fluctuations due to reliance on single IPs [16]. Market Trends - The rise of **collectibles** is linked to the popularity of certain IPs, such as **Ultraman** and **My Little Pony**, which are expected to drive future sales [13][16]. - The **social and trading value** of collectibles is significant, with many products designed to foster community engagement and social currency [6][14]. - The industry is witnessing a trend towards **vertical integration**, with companies expanding their operations from distribution to include IP development and direct sales [21][22]. Additional Insights - The **cultural shift** towards collectibles is seen as a genuine trend, particularly among the younger generation, who are willing to spend on emotional and nostalgic products [21]. - Companies are encouraged to explore investment opportunities in the collectibles sector, considering market risks and liquidity [22]. Conclusion - The collectibles industry, particularly in the context of IP-driven products, is poised for significant growth, driven by changing consumer preferences and successful business models from leading companies like **Pop Mart** and **Kailu** [19][22].

Investment Rating - The report maintains an "Outperform" rating for the company [2] Core Views - The company is the largest and fastest-growing enterprise in the trendy toy industry, with a strong IP-centric strategy and successful overseas expansion, contributing nearly 30% of revenue by H1 2024 [4] - The trendy toy market in China has grown from 6.8 billion yuan in 2015 to 60 billion yuan in 2023, with a CAGR exceeding 30%, and the company holds an 8.5% market share, ranking first [4] - The company's IP development, operation, and supply chain capabilities are leading, with a membership base of 38.93 million by H1 2024, contributing over 90% of sales and a repurchase rate of around 45% [5] Business Overview - The company has a comprehensive IP matrix, with core IPs like SKULLPANDA, MOLLY, DIMOO, and THE MONSTERS showing strong growth and long lifecycles [5] - The company's IP commercialization success rate is high, and its category expansion strategy, including games, theme parks, plush toys, and building blocks, has been well-received [6] - Overseas revenue has shown phenomenal growth, with stores opened in over 20 countries/regions, and overseas revenue accounting for nearly 30% by H1 2024 [6] Growth Drivers - The company's IP commercialization success rate is high, and its category expansion strategy has driven rapid same-store growth domestically [6] - Overseas revenue has shown phenomenal growth, with sufficient space for further store openings, and cultural export has been smooth [6] - The company's membership system, with 38.93 million members by H1 2024, contributes over 90% of sales and has a repurchase rate of around 45% [5] Financial Performance - The company's revenue and net profit have maintained rapid growth, with a 62% YoY increase in revenue to 4.56 billion yuan in H1 2024 [60] - The company's gross margin has remained above 60%, with a net margin recovering to over 15% by H1 2024 [69] - The company's operating cash flow has shown a clear upward trend, reaching 1.91 billion yuan in H1 2024 [74] Industry Overview - The trendy toy market in China has grown from 6.8 billion yuan in 2015 to 60 billion yuan in 2023, with a CAGR exceeding 30%, and is expected to reach 110 billion yuan by 2026 [17] - The market concentration in China's trendy toy industry is low, with the company holding an 8.5% market share, ranking first [22] - Consumers' primary reasons for purchasing trendy toys are the element of surprise and their love for the IPs, with 46.78% of consumers citing surprise and 38.95% citing IP as their main motivations [27] Valuation and Investment Recommendation - The report forecasts adjusted net profits of 2.61 billion yuan, 3.51 billion yuan, and 4.24 billion yuan for 2024-2026, representing YoY growth of 141%, 35%, and 21%, respectively [138] - The company's absolute valuation is estimated at 91.1-112.1 HKD, with a relative valuation of 84.2-103.6 HKD, based on a 2025 PE multiple of 30-40x [149]

Stock Performance - The stock price of Pop Mart surged nearly 5% during the trading session, reaching a new high since March 2021, with a year-to-date increase of over 330% and a market capitalization approaching HKD 120 billion [1] Sales and Profit Growth - Total sales and adjusted profit are expected to grow by 27% and 29% year-over-year, respectively [2] - The growth is attributed to increased IP awareness, expanded product categories, increased number of overseas stores, diversified channels, and improved supply chain [3] Market Expansion - Pop Mart's global market expansion trend is expected to continue into next year, with sales in China and overseas markets projected to grow by 14% and 47% respectively by 2025 [1] Analyst Rating - CLSA maintains an "Outperform" rating on Pop Mart and raised the target price by 21.7% to HKD 84 [4]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of 108 HKD, indicating a potential upside of 40.8% from the current price of 76.7 HKD [6][14]. Core Insights - The recent surge in popularity of the Labubu IP is expected to drive accelerated revenue growth in Q4 2024, enhancing the company's long-term growth outlook and market confidence [2][3]. - The Monsters series has seen a significant increase in popularity, with a 292% year-on-year revenue growth in the first half of 2024, contributing to 13.7% of total revenue and ranking second among all IPs [3][4]. - The company has adjusted its long-term growth forecast for overseas markets upward, reflecting a more optimistic view of future revenue streams [2][4]. Financial Summary - Revenue projections show a substantial increase from 4,617 million RMB in 2022 to 22,156 million RMB in 2026, with a year-on-year growth rate peaking at 96.7% in 2024 [5][9]. - Net profit is expected to rise from 476 million RMB in 2022 to 5,547 million RMB in 2026, with a notable growth rate of 140.1% in 2024 [5][10]. - The company's P/E ratio is projected to decrease from 204.9x in 2022 to 17.2x in 2026, indicating improving valuation metrics as earnings grow [5][10].

Group 1 - The core viewpoint of the article highlights the significant rise in Pop Mart's stock price, which increased by 4.3% in early trading, surpassing 80 HKD, with a market capitalization exceeding 107 billion HKD and an annual increase of nearly 300% [1] - The overall revenue for the third quarter is projected to grow by 120% to 125% year-on-year, with growth rates of 55% to 60% in mainland China, and 440% to 445% in Hong Kong, Macau, Taiwan, and overseas markets [1] - Both Everbright Securities and Credit Lyonnais have optimistic reports regarding the company's performance and future growth, believing that its IP operation capabilities and market expansion will lead to higher performance growth [1]