Morgan Stanley stated that the key to POP MART's growth in the Chinese market lies in its attractive products, while its strong expansion in overseas markets is mainly due to the high productivity of offline stores. It is expected that its sales in the first half of the year will increase by 58% year-on-year, adjusted net profit will increase by 78% year-on-year, and annual net profit will increase significantly by 102% year-on-year
POP MART expects performance to exceed expectations, with Morgan Stanley forecasting a doubling of net profit for the full year.
On Thursday, July 18, trendy toy company POP MART released a profit forecast, expecting a year-on-year revenue growth of no less than 55% and a net profit growth of no less than 90% for the first half of 2024.
The report stated that the growth in performance is mainly attributed to the further enhancement of the global recognition of its IP, diversified product categories, rapid growth in revenue from Hong Kong, Macau, Taiwan, and overseas, and continuous optimization of product costs.
Following the profit forecast announcement, POP MART's stock price rose against the trend, surging nearly 12% at one point, closing up 10.49% on the same day at HKD 41.6 per share, with a trading volume exceeding HKD 600 million.
On the 18th, Morgan Stanley released a research report, forecasting a year-on-year sales growth rate of 58% for POP MART in the first half of the year, and an adjusted net profit growth rate of 78%, far exceeding the bank's previous forecasts of 40% and 45% for revenue and net profit growth.
The report stated that strong growth in online sales and the theme park Pop Land are the main drivers in the Chinese market, with overseas revenue accounting for 30% of total revenue in the first half of the year.
Morgan Stanley believes that with multiple profit-driving factors at play, there is still room for POP MART's stock price to rise, setting a target price of HKD 52, representing a 25% increase from the closing price on Friday.
IP, products, and channels all in full force, optimistic about growth prospects in the second half of the year
For the Chinese market, the report predicts a revenue growth rate of 40% for POP MART in the second quarter, higher than the 20% in the first quarter, mainly driven by the strong performance of online channels and the promotion of Pop Land theme park. In addition, offline sales also performed well, with same-store sales growth (SSSG) in the youth market becoming an important driver.
Morgan Stanley pointed out that "attractive products" are key to accelerating growth in the Chinese market.
For the overseas market, the report predicts a revenue growth rate of 240% in the second quarter, similar to the first quarter. By channel, offline stores are the main contributors to sales volume, with an estimated revenue contribution of around 70%. Additionally, the strong momentum of the brand, products, and IP has also driven rapid growth in overseas online channel sales.
The report believes that the key driver in the overseas market is the productivity of offline stores, with POP MART's productivity currently exceeding 100% and benefiting from the exploration of new markets and the enhancement of brand influence. Overall, Morgan Stanley expects POP MART's net profit for the whole year to soar by 102%. Adjusted net profit is expected to increase by 72% year-on-year. They also have a positive outlook on POP MART's prospects in the second half of this year, expecting to add a net of 50-60 stores in the second half of the year. The key factors driving growth are the accelerated replenishment speed and the expansion of product categories