According to the research report released by Sealand Securities, maintain the "buy" rating of Pop Mart (09992), increase the company's profit forecast, and predict that the operating income will be RMB 8.637 billion/11.204 billion/13.627 billion, and the net income attributable to the parent will be RMB 1.634 billion/2.156 billion/2.7 billion. Adjusted net profit will be RMB 1.737 billion/2.268 billion/2.815 billion. As a leader and pioneer in trendy cultural and commercialization, the company operates and monetizes IP through a complete industry chain and platform advantages. Product category expansion logic continues to be validated, and "Outbreak 2.0" is starting the multiplier effect.

The main views of Zhonghai Securities are as follows:

New product categories such as building blocks are launched, and IP continues to break through the circle.

(1) The new Labubu Forest Secret Base series puzzle blocks are expected to be launched on the online platform at 8:00 pm on June 13th. The series includes 5 scenes, with individual prices ranging from RMB 199-399 and a set price of RMB 1,335. As of June 11th, the official Tmall flagship store has more than 10,000 people who have added this to their cart. The sales volume of the recent new Pop Mart POPCARD collection card on Tmall has exceeded 5,000. The company expects to launch three new product lines in 2024, and the proportion of non-blind box products is expected to continue to increase, it is expected to improve the domestic market growth rate and the same store revenue of domestic stores.

(2) The company promotes IP and trendy culture through various methods such as trendy exhibitions, offline stores, mall exhibitions, joint cooperation, and KOL promotions, etc., further accelerating IP breakthroughs. The first game of Pop Mart "Dream House" will be launched on June 27th. The number of reservations on the official website has exceeded 3.3 million, and the planning of the second phase of Beijing Pop Mart City Paradise has officially started, which is expected to continue to improve the global momentum of the IP.

Going global from stage 1 to 100 and opening the multiplier effect.

(1) The company began its global layout in 2018 and initially adopted a B2B and B2B2C distribution model. From 2022, the strategic focus shifted to DTC, and it began to open offline stores on a large scale for channel expansion. In 2020, the first overseas direct sales store was opened in South Korea, and by the end of 2023, they will have 80 stores. It is expected to open 50-60 stores in 2024.

(2) Overseas income was RMB 1.066 billion in 2023 (YOY+134.9%), and revenue accounted for 16.9% (up 7.1pct YoY). Overseas income in Q1 2024 increased by 245% YoY to RMB 250 million. With popular IP such as Labubu, Crybaby, and Peach Riot, the company's overseas growth will present the multiplier effect of "IP momentum x channel growth," and it is expected that the overseas income growth rate in 2024 will not be less than 100% (i.e., RMB 2.1 billion+). In addition, the pricing of overseas products is higher, the gross profit margin is higher than domestic ones (in 2023, the gross margin rates of overseas/domestic were 64.9%/60.6%), and it is expected to lower logistics/production costs through global supply chain and improve operational efficiency.

The development of Douyin channel is fast, and the product promotion maintains a normal pace.

(1) According to "Gray Yan," the GMV of Pop Mart's three official Douyin accounts between January and May 2024 were RMB 37.64 million/38.23 million/42.43 million/60.45 million/79.63 million (MoM -9.9%/+1.6%/+11.0%/+42.5%/+31.7%), totaling RMB 258 million (YOY+126%). Among them, the GMV of the "Pop Mart Douyin flagship store" in May was RMB 61.14 million (MoM +45.5%), and the total for January to May 2024 was RMB 187 million (YOY+76%); The "Pop Mart Living Space" and the "Pop Mart Unboxing Experience Hall" had GMV of RMB 13.77 million and RMB 4.71 million in May respectively.

(2) Recently launched new blind box series such as "HACIPUPU Forest Adventure" and "Zsiga Allows All This", as well as new MEGA products such as "MEGA SPACE MOLLY 400%+100% Flying Girl" and "MEGA SPACE MOLLY 400%+1000% Ultraman", etc. According to the statistics on the Pop Mart official public account, a total of 37 new blind box products and 16 new MEGA products were launched from January to May 2024 (41/14 in the same period of 2023).