The Zhitong Finance App learned that Huachuang Securities released a research report stating that maintaining Bubble Mart (09992)'s “recommended” rating, the company's net profit for 24-26 is 2.152/2.858/3.537 billion yuan, respectively, with a target price of HK$56.2. The company's IP enables the expansion of business boundaries and high-quality growth in overseas markets. Trendy gaming products in the domestic market still maintain a high level of prosperity. The company promotes new products and expands business boundaries through IP, and is optimistic about the growth space in categories such as building blocks, as well as the backfeeding effect of the park and game business on core IP. The company uses localized innovation and DTC operations to get close to the market in overseas markets, and is optimistic about the growth in performance brought about by overseas store expansion and improved store efficiency.

Matters: The company publishes the 2024 semi-annual report. In the first half of the year, the company achieved revenue of 4.56 billion yuan, an increase of 62.0% year on year; net profit of 0.96 billion yuan, up 102.0% year on year, all exceeding previous performance forecasts.

The main views of Huacheng Securities are as follows:

Domestic: Omni-channel growth is steady, and retail channel store efficiency is improving.

In the first half of the year, the company achieved revenue of 3.21 billion yuan, or +31.5% year-on-year; of these, offline/online/wholesale and other channels achieved revenue of 1.79/1.1/0.32 billion yuan respectively, +23.1%/+34.0%/+90.8% year-on-year. By channel, 1) Offline channels: 24H1 retail/robot store revenue was +24.7%/+16.2% year-on-year, respectively, compared to +11 or -1 stores opened at the end of '23. In terms of store efficiency, retail stores all achieved double-digit growth in the first half of the year. Among them, first-line/new first-tier/second-tier retail stores and retail stores in other cities had different store efficiency of +19%/+14%/+10%; the average monthly sales of robot stores in the first half of the year were +15% compared to the same period last year. 2) Online channel: 24H1's Tmall/Douyin/box drawer channel revenue was +28%/+91%/+7% year-on-year, and the new channel revenue growth rate was impressive. 3) Wholesale and others: The park business satisfies the consumer's immersive IP experience, and plans to launch a dessert shop business in the future.

Hong Kong, Macao, Taiwan and overseas: Channel expansion is taking great strides, and 30-40 new stores are expected to open in the second half of the year.

In the first half of the year, the company achieved revenue of 1.35 billion yuan, +259.6% year-on-year, and continued to accelerate from the first quarter (24Q1 revenue growth rate of 245-250%). The revenue share also increased from 13.4% in the same period to 29.7%, surpassing Hong Kong, Macao, Taiwan and overseas revenue for the whole of 2023. Looking at the subregion, the Southeast Asia market is the company's main driving region, with revenue +478%; the European and American markets are growing at an impressive rate, with revenue in North America/Europe, Australia and other markets +378%/+159% YoY; and revenue in the East Asian market and Hong Kong, Macao and Taiwan regions +154% YoY.

By channel, 1) Offline channels: 24H1 revenue was +397%, of which retail/robot store revenue was +442%/+110%, respectively, and 83/143 with net store openings of +13/+44 stores at the end of 23, respectively. In terms of store efficiency, retail stores/robot stores were +134%/+34%, respectively. This year, the newly opened LABUBU themed store in Bangkok, Thailand surpassed 10 million in a single day, and the company has become a phenomenal brand in the Southeast Asian market. 2) Online channel: 24H1 revenue +335% YoY, of which the company's official website/Lazada/Shopee revenue was +465.5%/+387.9%/+205.2% YoY. 3) Wholesale and others: 24H1 revenue +22.5% YoY. Looking ahead to the second half of the year, the company plans to continue opening 30-40 new overseas stores.

Increased profitability and optimized cost rates.

24H1 achieved a gross profit margin of 64.0%, +3.6 pcts year over year. The main reason was the continuous optimization of the company's supply chain, a decrease in the share of outsourced products, and an increase in the share of high-margin overseas product sales. On the cost side, the company achieved a sales/management expense ratio of 29.7%/9.5%, -1.5/-2.2 pcts year-on-year, mainly due to the increase in the number of employees in the company. Taken together, the company achieved a net profit margin of 20.2%, +3.3 pcts year-on-year.

Risk warning: raw material prices fluctuate, channel expansion falls short of expectations, new customer cultivation falls short of expectations, etc.