Capture the high growth of the dual market. The company is mainly positioned in the private brand lifestyle products market and trendy toy market. Among them, self-owned comprehensive retail contributed the most revenue through Mingchuang Premium brands.

The competitive landscape of this market is scattered, and the global market size is expected to grow at a double-digit compound growth rate to 86.8 billion US dollars over the next three years. With its cost advantage and unique business model, Mingchuang Premium has seized market share. The global and Chinese market share reached 6.7%/18.5% in the first half of 2024; the Chinese trendy game market is also showing a rapid expansion trend. We expect to break through 76 billion yuan in 2024 and continue the double-digit expansion trend. The diversification of the market has promoted the continuous enrichment of products such as blind boxes and building blocks.

TOP TOY mainly integrates multiple categories, forming an advantage in the entire industry chain. Looking ahead to the next three years, the company's revenue/profit is expected to grow by more than 20%.

Diversified store business models are adapted to local conditions. Mingchuang Premium uses three store operation models according to the market environment to achieve rapid expansion. The partnership model is the main expansion method; the agency model is suitable for overseas markets with large cultural differences; and the direct management model is used in regions with high market potential to directly reach consumers. As of the first three quarters of 2024, Mingchuang Premium had 7,420 stores in 112 countries and regions. Currently, the three models account for about 60%, 30%, and 10% respectively. The number of mainland partner model and overseas agent model stores has increased significantly. Looking forward to the future, we expect the partner model to continue to expand; the sinking market and overseas markets will still be dominated by the agency model; however, the number of overseas stores under the direct management model is expected to increase.

Stores are expected to expand steadily in the future. Mingchuang Premium's revenue grew steadily in the first half of the year, mainly driven by an increase in the number of stores. In 2024, the company plans to add 340-450 Mingchuang stores in mainland China and 550-650 overseas Mingchuang stores. The company completed about 80% of its progress in the first three quarters, and store expansion is progressing steadily.

Mingchuang Premium's product positioning and diversified store business model have won praise in the market, and it is expected that future revenue in the Chinese market will continue to grow by double digits. The TOP TOY brand has also achieved good growth under the trend of happy consumption. In overseas markets, Mingchuang Premium has accelerated its layout and is expected to continue to maintain a high double-digit growth rate in the future. We believe that going overseas in the next three years will further open up room for growth, and the pace of overseas store expansion will continue to be slightly faster than in the mainland market. We expect single-store revenue and average number of stores to show a double-digit growth trend. Taken together, overseas revenue is expected to show impressive performance of 30-40% in the next three years, and the contribution to the company's overall revenue is expected to be close to 50%.

For the first time coverage, a buy rating was given, with a target price of HK$60. Mingchuang Premium showed the speed and results of high-quality overseas expansion in the first 3 quarters of 2024. Coupled with the company's continuous improvement of product strength through high-quality design resources and IP co-branding, as well as continuous improvement of the efficient supply chain system to help optimize inventory and achieve a new rhythm of long-term high quality and high frequency, the company's future performance should be superior to that of the industry. We gave the company an average price-earnings ratio of 20 times (the average price-earnings ratio for the past 3 years was reduced by 1 standard deviation). The current exchange rate target price is HK$60, corresponding to 0.9 times PEG.