Main points of investment

Fashion play industry: explosive growth of market scale, letting a hundred flowers blossom

Tide play industry: explosive growth, the competition pattern is more scattered. In 2015-19, the scale of China's fashion game market increased from 6.3 billion yuan to 20.7 billion yuan (CAGR is 34.6%), and is expected to reach 76.3 billion yuan in 2024, showing an explosive growth trend. At the initial stage of the development of the industry, a hundred flowers blossom, CR5 is only 22.8%.Pop Mart InternationalThe first market share (8.5%).

Blind box industry: "uncertainty" mechanism increases interest, highPremium& High repurchase attribute. Blind box culture has the typical characteristics of high added value and high repurchase rate. By introducing gambling mechanism and stimulating consumers' emotional resonance, blind box culture gives blind box collection and social attributes, reduces artistry, increases entertainment, and has full explosive potential. The size of the blind box market increased from 60 million yuan to 3.11 billion yuan in 2015-19, with CAGR of 164.96%, and is expected to reach 31.28 billion yuan in 2024 (58.73% of CAGR in 19-24), accounting for about 43.7% of Popomat market. Pop Mart International IP mining and operation ability is strong, consumer touch comprehensive, in-depth. From the current perspective, Pop Mart International's market influence is significantly higher than that of his peers, and the brand advantage is magnified after listing; considering that high-quality IP tends to choose leading companies to ensure IP promotion and sales, it is expected that the market will show Hengqiang the strong in the downtrend of feedback.

Driving force: the core of emotional consumption & social attribute strengthening & capital boost. (1) consumers upgrade from material consumption to emotional consumption, incubating the rise of the trend toy industry. (2) supply-side optimization promotes the expansion of the power of trendy toys, the number of IP increases and the price is gradually close to the people. (3) the blind box increases the entertainment based on uncertainty, and the repurchase attribute is strong. (4) Cultural promotion of social media to stimulate the social attributes of tide play.

Pop Mart International: the pioneer of Chinese tide play, covered by the whole industry chain of blind box.

Pop Mart International was founded in 2010, has formed a complete IP industrial chain closed loop, including (1) upstream IP training: quality artist team creation and mature IP cooperation; (2) mid-stream IP operation: product design and production and professional commercial transformation model mature. (3) downstream IP realization: consumers reach comprehensive and in-depth, and traffic operation is realized through channel construction and advertising marketing. From 2017 to 2019, the company's revenue increased from 158 million yuan to 1.683 billion yuan (CAGR reached 226.34%)Net profitFrom 2 million yuan to 451 million yuan (CAGR reached 1595.1%), the performance exploded. The company has grown into a leading player in China with industry-wide chain play IP building and diversified channel layout.

In the short term: Pop Mart International is partial to toys in the field of fashion play, on the one hand, expand the diversified IP matrix to enhance the influence of IP, on the other hand, through blind box play + multi-directional consumer touch to occupy the minds of consumers, and gradually form a brand effect.

Medium-and long-term: based on the leading IP market influence, digital transformation to improve market insight, while broadening the product structure to form a blind box, hand-made, derivatives and other relatively rich product matrix. Medium-and long-term good IP has a long life cycle and premium rate, through IP re-authorization to achieve multi-dimensional extension of the industrial chain in various fields.

Core: IP advantage image creation & iteration as the core, leading channel layout

IP: high-quality artists & mature IP cooperation, early formation of IP industry chain closed loop. At present, it has a rich reserve of IP, including its own IP12 (20H1 income 281 million yuan, + 45.34%, 34.34%), exclusive IP25 (20H1 income 119 million yuan, + 68.91%, 14.57%), cooperative IP56 (20H1 income 133 million yuan, + 258.68%, 16.29%). In 1919, the two well-known IP Molly and PUCKY generated nearly 800 million yuan, and the newly hatched Dimoo and the Monsters generated more than 100 million revenue. In terms of IP creation, it binds high-quality artists with high incentive returns and high market position, while continues to develop mature IP cooperation; in terms of IP operation, under the background of the company's leading market position, high-quality artists and IP providers are rich in resources to ensure rapid iteration of products, fan operation & joint marketing model is mature, and it is expected that the market position can be maintained continuously.

Channels: comprehensive layout of channels, diversification of online channels and accelerated expansion offline. 1) offline retail stores: card position in the core of the mainstream business district in first-and second-tier cities, focusing on display and experience. 20H1 affected by the epidemic has slowed down, with income of 313 million yuan (+ 34.49%), accounting for 38%. 2) Robot stores: wide coverage, low input cost, convenient product adjustment, mainly located in crowded shopping centers, 20H1 income 106 million yuan (+ 27.92%), accounting for 13%. 3) online channels: three-party e-commerce platform and its own platform two-wheel drive, registered members reached 3.6 million, as of 20H1 revenue of 334 million yuan (+ 104%), accounting for 41%. 4) Wholesale & Exhibition: continuously expand the distribution network at home and abroad, in order to improve the market influence and absorb high-quality artists.

Profit forecast and valuation

From 2020 to 2022, we expect the company to achieve a revenue of 25.20 134.03X/66.86X/38.96X 42.59 / 6.767 billion, an increase of 49.7%, 69.0% and 58.9%, and a net profit of 6.00 won, 12.03 / 2.065 billion, and 33.0%, 100.5% and 71.6%, respectively, corresponding to the current market value of 134.03X/66.86X/38.96X, giving the "overweight" rating for the first time.