"You Never Know Until You Open It"... Pop Mart's Stock Soars Eightfold in a Year Targeting Generation MZ [Company & Issue]

Stock Price Soared 718% Over the Past Year
Transformation from Toy Company to Character IP Business
Potential Regulation of Blind Boxes Raises Concerns

A Pop Mart store in Shanghai, China. Photo by Reuters and Yonhap News.

Chinese toy company Pop Mart has seen its stock price surge by over 700% in the past year, rising to become the world's top toy company by market capitalization. Fueled by the explosive popularity of the global character "Labubu," the company has continued to post strong earnings growth even amid mounting concerns over an economic downturn. If Pop Mart can shed its traditional toy company image and establish itself as a strong intellectual property (IP) character company like Walt Disney in the United States, its corporate scale is expected to grow even further. However, there are concerns about potential regulations on its main business-doll vending machines-which have been driving revenue growth, and signs of overheating in its stock price, suggesting that volatility may remain high for some time.

Stock price up 718% since early August last year... "Labubu" craze

On August 21, at the Hong Kong Stock Exchange (HKEX), Pop Mart's share price closed at 319.80 Hong Kong dollars (HKD), a 717.90% surge from 39.10 HKD in early August last year. Its market capitalization reached 429.4 billion HKD (approximately 76.87 trillion KRW), making it the world's largest toy company by market cap. This is nearly five times the size of Hasbro, the previous leader, which stands at 11.1 billion USD (about 15.53 trillion KRW).

Pop Mart's stock price has soared this year, driven by strong earnings growth. On August 20, the company announced that its revenue for the first half of this year rose 204.4% year-on-year to 13.88 billion yuan (about 2.7 trillion KRW), while net profit jumped 396.5% to 4.57 billion yuan (about 890 billion KRW). Notably, net profit far exceeded the market forecast of 350%, further boosting investor sentiment.

The driving force behind Pop Mart's earnings growth has been the popularity of its character doll, Labubu. In the first half of this year, Labubu sales in the Americas increased by 1,142% compared to the same period last year, and by 729% in Europe. CEO Wang Ning stated during a conference call, "Our sales target for this year was 20 billion yuan, but now it seems reaching 30 billion yuan will be easy," adding, "Demand for character dolls, including Labubu, has surged in overseas markets, and we are considering expanding stores in emerging markets such as the Middle East, Central Europe, and Latin America."

Classified as leisure and consumer goods in the stock market... Emphasizing 'character IP' company status

Pop Mart Korea Homepage

Pop Mart began in 2010 as a variety store selling groceries and toys, but since 2014, it has rapidly grown after transitioning to a character doll merchandise company. Founder and CEO Wang Ning, born in 1987, graduated from Sias University in Zhengzhou with a degree in advertising. He later developed an interest in content business and IP character merchandise development, which led him to establish Pop Mart.

Pop Mart has maintained a strategy of selling character dolls through vending machines, packaging them in "blind boxes" that conceal which character is inside, typically priced around 69 yuan (about 13,400 KRW). This sales method has become popular not only in China but also among Generation MZ worldwide, resulting in massive sales. Currently, Pop Mart operates more than 500 directly managed stores and 2,351 vending machines across over 30 countries, including China.

Due to this business structure, Pop Mart is still referred to as a toy brand in the market. In the Hong Kong stock market, its image as a toy retailer is emphasized, and it is classified as a "leisure and consumer goods" company. Its main competitors are also seen as American toy companies like Hasbro and Mattel. However, Pop Mart is now seeking to transform itself beyond a simple toy brand into an IP business company like Walt Disney in the United States.

In a recent interview with China Global Times, CEO Wang Ning said, "There is still a strong tendency to see Pop Mart as a young and trendy toy business with 15 years of history, but if you look at us as an IP business company, we are not just a young company." He added, "Labubu's establishment as a global IP is thanks to our inclusive IP platform for artists and designers, and we want to be recognized as a cultural industry company that systematically manages such IPs."

Potential regulations on vending machine 'blind box' sales... "Caution needed over signs of overheating"

Pop Mart Korea Homepage

However, concerns have been raised about potential regulations on blind boxes, which have been driving Pop Mart's revenue growth, suggesting that investors should exercise caution going forward.

According to the People's Daily, in June this year, China issued a warning that "strict verification is necessary regarding age, parental consent, and prevention of excessive spending when selling blind boxes and trading cards to children under the age of eight." Professor Yang Puwei of Xinan University Law School also told the People's Daily, "Blind box sales exploit the immature psychology and weak self-control of minors, inducing irrational consumption," adding, "This goes against the intent of the Minor Protection Act." Although Pop Mart was not specifically mentioned, the warning is interpreted as an indirect message, given that blind boxes are Pop Mart's core product.

Some analysts have also pointed out that, given the recent sharp rise in stock price and the extremely rapid changes in the popularity of IP character products and consumer trends, investors should be wary of stock price volatility. Jeff Zhang, an analyst at global fund rating agency Morningstar, said, "It is still uncertain whether the popularity of Pop Mart's key IP characters such as Labubu will continue. While sales growth remains solid for now, consumer preferences and trends can change very quickly," adding, "The market is showing some signs of overheating, and it is important to note that the stock price is overvalued."