Deutsche Bank Maintains Sell Rating on Pop Mart, Warns IP Cycle May Have Peaked
N.R. Finch
Deutsche Bank reiterated a Sell rating on Pop Mart (09992) with a HK$140 target — roughly 10% below the current price — arguing that flagship IP Labubu is losing steam and H2 revenue may turn negative year-on-year, a slowdown the market has not yet priced in.
What is Deutsche Bank's call?
Sell rating maintained, target price HK$140 versus a share price of HK$154.90. This means → Deutsche Bank sees roughly 10% more downside.
Full-year revenue forecast: about RMB 35 billion, down 6% year-on-year. Adjusted net profit: roughly RMB 11 billion, down 13%.
Both figures sit about 20% below Bloomberg consensus. In plain terms = Deutsche Bank is far more bearish than the Street, betting most investors have not grasped how fast growth is fading.
Why does growth fall off a cliff?
Q1 revenue grew 75%-80% year-on-year. Deutsche Bank expects Q2 to plunge to roughly 1.6%, a 16.3% drop quarter-on-quarter.
H2 looks worse: Q3 may decline about 35% year-on-year, Q4 about 18%. This means → the swing from high growth to contraction could land this summer.
This reflects a complete lifecycle turn in Pop Mart's growth engine — the hit-IP cycle is running its course.
What went wrong with Labubu 4.0?
THE MONSTERS Hair Salon (Labubu 4.0) launched with FIFA World Cup exposure and a Lisa endorsement. Expectations were high, but actual sales fell well short.
The telling signal: just one week after launch, some standard-edition items traded at roughly RMB 50 on the secondary market — the retail price is RMB 159. In plain terms = even resellers are dumping at a loss, a sign that speculative demand has dried up.
Deutsche Bank notes the discount is steeper than for other IP lines — collectors and resellers are cooling off at the same time, signalling weakening IP appeal.
Can the overseas business hold up?
China sales are expected to grow about 15% year-on-year in Q2, but the weak Labubu 4.0 reception in June may flatten or reverse that trajectory.
Overseas revenue is forecast to drop roughly 19% year-on-year — versus about 40% growth in Q1. This means → the international business swung from boom to contraction in a single quarter.
This reflects the IP cycle dragging on overseas expansion — the problem is not store rollouts slowing, but products not selling.
What do the markdowns tell us?
During China's 618 shopping festival, Pop Mart offered tiered discounts and "lucky bags" on its Tmall flagship store. The Labubu World Cup line was bundled into every fourth lucky bag — a sign that sell-through fell short of plan.
Similar promotions have spread to Indonesia, Singapore, and Thailand, with bundled lucky-bag discounts to clear inventory. In Western markets, third-party retailers are offering roughly 20% off across the board.
In plain terms = last year's H2 launches sold out on arrival; this year the same shelves are being cleared at a discount — that contrast alone signals margin pressure.
What should investors watch next?
Deutsche Bank projects H1 revenue of RMB 18.2 billion, up 32% year-on-year, and adjusted net profit of RMB 6 billion, up 27% — the first half still looks decent on paper.
The real test is H2: whether Pop Mart can launch a new hit IP to succeed Labubu will determine if Deutsche Bank's bearish forecast is proved wrong.
This means → if Q3 results confirm a -35% year-on-year revenue drop, the valuation case for the stock weakens further.
Content is for reference only, not financial advice.