POP MART made a net profit of over 900 million in the first half of the year! Will the "number one trendy play stock" open up room for growth?

On August 20, the performance of POP MART (09992.HK), known as the "first stock of trendy toys", was officially released.

The announcement shows that in the first half of 2024, POP MART achieved a revenue of RMB 4.56 billion, a year-on-year increase of 62.0%.

Specifically, POP MART's revenue from mainland China reached RMB 3.21 billion, a year-on-year increase of 31.5%, showing strong resilience in the current consumption environment.

Furthermore, the company's "going global" business is accelerating, with outstanding performance. Its revenue from Hong Kong, Macau, Taiwan, and overseas markets has reached RMB 1.35 billion, a significant year-on-year increase of 259.6%, accounting for approximately 29.7% of its total revenue, a substantial increase compared to the same period last year.

Looking globally, the trendy toy industry is still in a high-growth period. According to a Frost & Sullivan report, the global trendy toy market is expected to reach USD 44.8 billion in 2024. Particularly in Southeast Asia where the proportion of young people is high, the trendy toy market is thriving. This is also a key direction for POP MART's efforts, such as the opening of the Central Ladprao store in Bangkok, Thailand in February this year, and the opening of the first castle-themed store at the famous tourist spot Banahills Park in Vietnam in May, both of which have become popular local check-in spots.

In addition, POP MART continues to expand its product categories, and its IP incubation has blossomed, serving as one of the important drivers of the company's performance in the first half of the year.

In the first half of the year, POP MART's classic IPs such as MOLLY, SKULLPANDA, THE MONSTERS achieved excellent results once again, while new IPs like Hirono Ono and Zsiga continued to contribute significantly to revenue. The distribution of IP income became more balanced, with 7 IPs achieving over a billion in revenue.

The lifecycle of trendy toy products is short, and POP MART's strategy lies in creating "trendy toy IPs" and enhancing consumers' love and loyalty towards IPs. In recent years, the company has taken a series of actions, including creating the first immersive IP theme park in the trendy toy industry in China, integrating trendy toy images like MOLLY and DIMOO into the game "Dream Home", and developing self-made mobile games like "Dream Home", continuously expanding the content boundaries of trendy toy IPs and exploring greater commercial growth opportunities While achieving high revenue growth, POP MART's operational efficiency has also been further improved.

In the first half of 2024, the company's gross profit margin was 64.0%, an increase of 3.6 percentage points compared to the same period last year. The inventory turnover days decreased from 133 days at the end of 2023 to 101 days. The strong product capabilities of the company are closely related to the increased probability of creating hot-selling items and the improvement in supply chain efficiency.

In the first half of this year, POP MART's attributable net profit was 921 million yuan, a year-on-year increase of 93.3%; adjusted net profit was 1.02 billion yuan, a significant year-on-year increase of 90.1%.

Looking ahead to the full year, Wang Ning, Chairman and CEO of POP MART, is very confident in the company's high growth. At the performance briefing for the first half of 2024, he stated, "We are confident in achieving a revenue of 10 billion yuan for the full year, with a projected annual growth rate of not less than 60%, and overseas growth of not less than 200%."

As of August 21st, POP MART surged by 9.56% to 45.85 Hong Kong dollars per share, with a market value of 61.57 billion Hong Kong dollars. It is worth noting that POP MART has rebounded strongly this year, with a cumulative increase of over 130%. The capital market's foresight regarding the company's performance has been evident.

Previously, CICC raised POP MART's target price to 50 Hong Kong dollars. UBS also released a report stating that it raised its forecast for POP MART's adjusted net profit for this year and 2026 by 3% to 11% to reflect faster-than-expected sales growth and improved profitability. The target price was raised to 51 Hong Kong dollars, indicating some upside potential from the current stock price.

However, investors need to be aware that with the sharp rise in stock price, POP MART's price-to-earnings ratio (TTM) has exceeded 35 times, higher than the 13.45 times P/E ratio of other toy and leisure goods stocks such as Miniso (09896.HK) and Doreen International (01126.HK).

Although POP MART differs from other toy and leisure goods companies in terms of business model and profit mechanism, its market barrier built on "trendy IP" may be more solid, potentially earning it a higher valuation than its industry peers. However, the current rapid growth in its stock price has outpaced the improvement in performance, and its valuation level is showing a unique high position. Therefore, as the stock price fluctuates, the battle between long and short positions may become more intense, and investors need to be vigilant against the uncertainty and risks this may bring