Bubble Mart maintains steady growth through IP incubation, category expansion, and channel development. The IP platform logic is continuously verified; it accelerates the expansion of new stores overseas, and directly replicates the successful experience of IP category expansion. Bubble Mart announced its results forecast for the first quarter of 2024. Achieved a 40-45% year-on-year increase in overall revenue, including revenue from mainland China increased 20-25% year over year, while revenue from Hong Kong, Macao, Taiwan and overseas regions increased 245-250% year over year. 1) In 1Q24, the online channel Douyin in mainland China grew at an impressive rate (95-100% year-on-year increase). It is expected that the company will continue to sort out the positioning of various online platforms and strengthen content buying points through new categories, live streaming, etc., and the Douyin channel is expected to continue to grow strongly throughout the year 24. 2) Verification of the ability to go overseas. In 1Q24, China's Hong Kong, Macao and Taiwan regions and overseas sales increased 245-250% year-on-year, and overseas expectations were high throughout the year.
Bubble Mart continues to grow at a high level overseas, and its ability to go overseas has been verified. According to Bubble Style's official account, Bubble Mart's first overseas castle theme store, the Ba Mountain Paradise Fort theme store, opened in Xigang, Vietnam. The store is located in the most visited theme park in Vietnam. Since 2024, Bubble Mart's overseas core area has been stable, and the fourth store in Sydney and the Galeries Lafayette pop-up store in Paris have opened one after another. We expect Bubble Mart to add 50-60 new stores overseas in '24. Overseas IPs such as Labubu and Crybaby are becoming more popular, and the IP localization logic is constantly being verified.
In 2023, Bubble Mart's overseas revenue was 1,066 billion, up 134.9% year on year. The number of overseas stores reached 80 (including joint ventures), 70 direct-run stores, and 42 new ones, 32 of which were completed in the second half of the year. Overseas OPM reached 18% for the whole year, +5.6pcts year-on-year.
The recovery in gross margin mainly benefits from revenue structure optimization, increased share of high overseas gross profit, supply chain cost control, and reduction in external procurement. We expect Bubble Mart's profit margin to continue to increase in the future.
Mainland China's revenue is growing steadily, and the leading IP+ category expansion logic is constantly being verified. Top IP continues to be popular. Labubu's new spring wild home series is on sale. Labubu recently co-branded with Lucky Coffee to launch accessories such as coconut lattes and color-changing thermos cups, which are popular on social platforms. Labubu Overseas Star Natural Traffic Vinyl Figure with Fire. According to the Bubble Fan official account, the company recently launched a number of new high-profile IP categories and co-branded models: 1) Bubble Mart launched the first set of limited-edition art life collection cards, including classic IP cards, unique color cards, signature cards, etc.; 2) The Labubu Forest Secret Base series will be launched on June 13 to build blocks to expand new categories of building blocks; 3) Hirono and sports brand Vans are selling very well. According to the bubble model, Bubble Mart City Park and Chaoyang Cultural Tourism Group signed the “Bubble Mart City Park Phase II” cultural tourism development cooperation project and will begin planning and design work. Since the first phase of Bubble Mart City Park opened in September 2023, it has brought more user growth to Bubble Mart. It has also helped the company to better analyze the strengths of different IPs and enhance the life cycle and value of IP. It is expected that in the future, it will be possible to further dig deeper into IP value through a variety of categories.
Maintain a buy rating. Bubble Mart is a product that meets the spiritual needs of modern young people. The company's leading IP expansion+category expansion+regional expansion logic is continuously verified. We updated Bubble Mart's profit forecast. We lowered our previous revenue forecast for 2024 to 8.664 billion yuan (original forecast of 9.027 billion yuan). Considering the continuous optimization of the company's supply chain and higher gross margin of high-growth overseas business to improve profitability, we raised the 2024 non-IFRS adjusted net profit forecast to 1,749 billion yuan (original forecast 1.592 billion yuan), and added 2025-2026 revenue forecasts to 10.981 billion yuan, 13.141 billion yuan, 2025 to 2026, respectively Non-IFRS adjusted net profit estimates were $2,273 billion and $2,751 million, respectively. Maintain a buy rating.
Risk warning: Overseas geopolitics influence the speed of expansion; new product sales fall short of expectations; increased industry competition affects profit margins