Key points of investment
The new 24H1 classic IP and PDC IP products are impressive, and the new categories tap audience needs. According to our statistics on the Bubble Mart official account article, in the first half of 2024, the company launched 47 new blind boxes, with Q1/Q2 being 24/23, and 23Q1/Q2/Q3/Q4 being 19/33/27/29 respectively. There are many excellent new products in Q2, such as the classic IP Labubu Invisible Me series, Baby Molly when I was three, PDC IP zsiga's Allow All This series and the new IP inosoul lucid dream series, etc. In the non-blind box category, MEGA came out new and stable. 24H1 launched 8 MEGA models (23H1 is 10), including 7 Molly models and 1 SP model; since May, new categories such as collectible cards and building blocks have gradually been implemented. We expect the company to better combine IP and design advantages with new categories of gameplay to better release the value of IP. In addition, the Dream Home mobile game public beta has been scheduled for June 27 (as of 24/6/18, TAPTAP iOS reservation list TOP8). City Park has signed a second phase with Chaoyang Cultural Tourism Group, and the company's IP ecosystem is gradually expanding.
The rise of IP drives omni-channel sales, and domestic and international revenue is expected to exceed expectations. 1) Overseas annual revenue is expected to exceed expectations. Since April, the popularity of the company IP Labubu and Crybaby has continued to increase in the Thai market, and IPs such as nyota are also popular in the US market, which is expected to drive rapid growth in overseas business throughout the year. The company's store expansion is also progressing steadily. According to our incomplete statistics, 24Q2 has opened new stores (including pop-up stores) in Vietnam, France, Australia, etc. In 24Q1, the company's overseas revenue increased 245% to 250% year-on-year, verifying the potential for overseas demand and the company's ability to go overseas. We are optimistic that the overseas business will contribute significantly to a significant increase in performance in 24 years. 2) We expect strong domestic sales in Q2, and Douyin in particular will accelerate. According to Feigua data, the live streaming sales of the company's Douyin channel “Official Flagship Store” account from 6/1-6/17 were about 50-75 million yuan, which clearly exceeded the overall sales for May. Looking at the product structure, new products such as the Crybaby Powerpuff Girls series, The Monster's I Foundyou vinyl face doll, and the Can't See Me series have all had impressive sales performance. We think some of them have benefited from the popularity of related IPs in countries such as Thailand. 24Q1's revenue from retail stores in mainland China increased 20%-25% year on year, Douyin channel increased 95%-100% year on year, and WeChat and Tmall channels changed their year-on-year growth rate. We expect the overall revenue growth rate of Q2 to be better than Q1.
Profit margins brought about by focusing on operating leverage have exceeded expectations. The company's offline stores have strong operating leverage. Considering 24H1's steady pace of opening stores at home and abroad, we expect the profit margin of the main business to exceed expectations, partly offset by fluctuations in gross margin caused by the expansion of revenue in new categories, which is offset by small investment in new businesses such as games and amusement parks.
Profit forecast and investment rating: Considering that the company's overseas IP sales in the first half of the year exceeded our expectations, we raised our adjusted net profit forecast for 2024-2026 from 15.08/19.30/2.270 billion yuan to 17.09/22.14/2,681 billion yuan, corresponding to PE about 29/22/18 times, maintaining a “buy” rating.
(The exchange rate of RMB to HKD is 2024/6/18 1 HKD = 0.9288 RMB).
Risk warning: Overseas growth falls short of expectations, overseas investment affects profits, domestic demand falls short of expectations