Morgan Stanley: Pop Mart — North America Estimates Likely Too Low

Morgan Stanley reiterates Pop Mart as a Top Pick, arguing that consensus estimates for its North American sales and overall profitability remain too conservative. High-frequency data suggests the market projects approximately RMB 6 billion in North American revenue for 2025, whereas Morgan Stanley assumes RMB 7.1 billion. While fourth-quarter sales volume should approach third-quarter levels, bears expect low growth or even a second-half decline in 2026, forecasting net profit well below Morgan Stanley's estimate of RMB 15.3 billion. The report contends that investors are overly focused on North America and the Labubu character, overlooking robust growth momentum across China and the broader Asia-Pacific region, alongside the diversification potential of non-Labubu IPs. Several catalysts could bridge this perception gap, including evidence of sequential quarterly growth recovery and successful IP diversification. During 2025, average offline store productivity in North America reached RMB 45 to 50 million, with payback periods of merely one to two months. The ongoing channel shift toward physical stores supports long-term brand building, longer consumer dwell times, and cross-selling opportunities. Morgan Stanley maintains an Overweight rating with a target price of HK$325, representing 66% upside potential from the current price of HK$196.20.