Pop Mart's performance soars to a record high, but capital pours cold water: How to balance the bubble and the future?

Pop Mart recently announced its annual financial report, showing significant growth in both revenue and net profit, but the capital market reacted quite differently. The report revealed that the company’s annual revenue reached 37.12 billion yuan, a year-on-year increase of 184.7%, setting a historical record; adjusted net profit attributable to shareholders reached 13.08 billion yuan, a year-on-year increase of 284.5%. This report should have become the focus of market attention, however, the stock price plummeted by 22.53% after the announcement, with a market value evaporating by over 60 billion Hong Kong dollars, attracting widespread attention from the market.

The capital market’s lukewarm response to this impressive financial report mainly stems from concerns about reliance on a single IP. HSBC Global Research analyst Lina Yan pointed out that the super-fast growth brought by LABUBU is difficult to sustain, and the decline in IP popularity may affect future performance. This concern is not unfounded—Pop Mart’s stock price has experienced multiple surges and drops since its listing, with LABUBU’s explosive popularity last year driving a significant rise in stock price, but as the hype cooled, the stock price also fell back. The nature of the industry determines that trendy toy IPs inevitably undergo small cycles from being popular to losing steam, and this volatility keeps investors cautious.

Pop Mart’s business model essentially revolves around emotional value and self-satisfying consumption. Founder Wang Ning has emphasized internally that the goal is not to make LABUBU a one-time trendy symbol, but to create an IP with long-term viability. This positioning determines that the company needs to continuously balance market popularity with sustainable development. Last year, the explosive popularity of LABUBU led to market shortages, and the company chose to proactively replenish supplies to cool down the hype, avoiding excessive bubble inflation, which reflects the management’s profound understanding of the IP lifecycle.

In response to the criticism regarding reliance on a single IP, Pop Mart is actively seeking solutions. On one hand, the company continues to incubate new IPs, while on the other hand, it is vigorously expanding its business boundaries, venturing into areas such as theme parks, jewelry, film and television, and even home appliances. This diversification strategy aims to build a more robust business moat, but it also faces new challenges—how to maintain the core competitiveness of the trendy toy business in new fields, and how to coordinate resource allocation across different business segments, are questions that need to be addressed.

From an industry perspective, Pop Mart’s strong financial report confirms the enormous consumer potential in the trendy toy market. Competitors such as Miniso and TOP TOY are attempting to replicate this IP-driven business model. However, Pop Mart’s case also reveals the peculiarities of the trendy toy industry: the popularity of IP is difficult to predict accurately, consumer preferences change rapidly, and there is a natural contradiction between the capital market’s expectations for growth and the actual pace of industry development. This contradiction will accompany Pop Mart’s development journey for a long time.

Currently, Pop Mart stands at the crossroads of business expansion and market skepticism. The company needs to prove that it can not only create blockbuster IPs but also establish a mechanism for sustainably producing quality IPs; it must not only tell a good story about new businesses but also ensure that new growth points can truly materialize. In the uncertain realm of emotional value consumption, how to grasp the moderate expansion and rupture of bubbles will be a key issue determining Pop Mart’s future direction.