Sustainability of Cash Flow for Trendy Toy IPs and Construction of Pop Mart's IP Moat

Based on an in-depth analysis of Pop Mart (9992.HK),

. As a global leader in the trendy toy industry, Pop Mart’s stock price rose by over 900% in 2024, with a market capitalization reaching HK$266 billion [0], demonstrating strong cash generation capabilities of its business model:

:

• ROE: 54.52%
  - Extremely high shareholder return rate, indicating excellent capital efficiency
• Net Profit Margin: 30.32%
  - Excellent profitability, far exceeding the traditional toy industry
• Operating Profit Margin: 40.58%
  - Strong pricing power and cost control capabilities
• Free Cash Flow: HK$4.537 billion
  - Real cash creation ability
• Current Ratio: 3.01
  - Low financial risk, stable operation

: Quarterly revenue surged by 204%, and overseas revenue jumped by 375.2% to RMB 5.07 billion [1], proving the replicability of the business model and its internationalization potential.

• Hidden item probability is only 0.69% (1/144), creating strong “gambler psychology” and collection impulse
• Members contribute 92.7% of sales, with an average order value of RMB 230
• Social currency attribute: Second-hand market premium of 10-20 times, enhancing IP value perception [1]

• As a nearly 20-year-old IP, Molly’s sales still maintain a 76% annual growth rate (user context)
• Labubu’s global attention has been comparable to top IPs such as Harry Potter and Star Wars (Google Trends data) [1]
• Extend lifecycle through series iterations rather than relying on a single hit product

• 401 direct stores (over RMB 7 million annual revenue per store)
• 2,300 robot stores covering sinking markets
• Revenue from online channels such as Douyin live streaming increased by 90.7% year-on-year [1]

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:

| IP Type | Representative Characters | Revenue Contribution | Strategic Position |
|---------------|---------------------------|----------------------|-----------------------------------|---------------------------|----------------------|-----------------------------------|
| Exclusive IP | PUCKY, Dimoo | - | Lock scarce design resources |
| Non-exclusive IP | Disney co-branded etc. | - | Expand user coverage, reduce dependence |

:

Dimension	Tencent Games Strategy	Pop Mart Strategy	Similarity
IP Reserve	Invest in studios (Riot, Supercell) + self-developed	Sign a large number of artists + internal incubation	⭐⭐⭐⭐⭐
Hit Mechanism	Internal horse race mechanism (multi-team PK)	IP hierarchical operation + horse race mechanism	⭐⭐⭐⭐⭐
Long-term Operation	“Honor of Kings” continuous update for 10 years	Molly continuous iteration for nearly 20 years	⭐⭐⭐⭐
User Stickiness	Social attribute + gameplay	Collection attribute + social currency	⭐⭐⭐
Monetization Ability	In-game purchases + ads	Blind box sales + licensing + parks	⭐⭐⭐⭐⭐

:

• Multiple studios develop similar games, internal competition
• “Honor of Kings” won from multiple MOBA projects
• Diversify risks via investment, cover all tracks

:

• Sign a large number of artists
  : Do not bet on a single designer, maintain diversification of IP sources
• IP hierarchical operation
  : Head IPs (Molly, Labubu) get key resources, mid-tier IPs test market response
• Fast iteration and elimination
  : Decide whether to continue investment based on market feedback after new IP launch
• Data-driven decision
  : Collect real-time sales data through 401 direct stores and online channels [1]

This mechanism ensures:

1. Reduce hit dependence risk
   : Even if an IP declines, there are always new IPs to take over
2. Increase hit rate
   : Under the law of large numbers, the larger the IP base, the more absolute number of hits
3. Maintain innovation vitality
   : Competition among artists drives creative evolution

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:

• Citi Group
  : Target price HK$308 (+90.1%), maintain “Buy”, expect 2025 revenue growth of 95% and overseas market growth of 159%
• Morgan Stanley
  : Target price HK$302 (+35%), maintain “Overweight”, expect sales to jump from US$3.6 billion in 2025 to US$6 billion in 2027

:

• Market Cap: HK$266 billion
• P/E Ratio: 35.53x (dynamic P/E ratio about 108x, reflecting high growth expectations)
• P/B Ratio: 16.98x

1. IP matrix continuous expansion
   : Plan to incubate 10+ new IPs annually
2. Globalization deepening
   : Americas growth rate nearly 900% in Q1 2025 [1]
3. New category放量
   : Plush toy revenue increased by 1,289%
4. Technology cost reduction
   : Vietnam and Mexico factories put into production reduce transportation costs by 25%

1. Valuation risk
   : Current valuation is at historical high, requiring continuous performance delivery
2. IP lifecycle management challenge
   : How to maintain freshness of old IPs and avoid aesthetic fatigue
3. Policy regulatory risk
   : EU’s new Toy Safety Directive may increase compliance costs
4. Intensified competition
   : New players enter the trendy toy market, may compress profit margins

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Pop Mart is replicating Tencent Games’ IP empire path but has its unique advantages:

:

• Manage hit uncertainty through horse race mechanism
• Establish multi-level IP matrix to reduce dependence risk
• Long-term operation ability (Molly for nearly 20 years, Honor of Kings for 10 years)

:

• Stronger monetization ability
  : 30.32% net profit margin vs game industry average of 15-20%
• Lower customer acquisition cost
  : Social transmission attribute of blind boxes
• Broader international space
  : Lower cultural barriers for trendy toys than games (policy, language)

:
The trendy toy IP business model has proven to generate . Pop Mart is building an IP moat similar to Tencent Games through the four-dimensional strategy of artist signing + IP horse race + omni-channel monetization + global expansion. Molly’s sustained growth (76% annual) for nearly 20 years proves that the commercial value of old IPs is not tied to public opinion热度, which is the strongest proof of the moat (user context).

:
For investors focusing on IP economy and consumption upgrade, Pop Mart represents a scarce target of “Chinese IP globalization”. Although its valuation is high, if it can maintain revenue growth above 50% and net profit margin above 30%, the current market cap is still supported. Key observation indicators include: Overseas revenue proportion, new IP incubation success rate, and progress of new businesses such as theme parks.

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[0] Gilin API Data - Pop Mart (9992.HK) Company Profile, Financial Analysis, Stock Price Data

[1] Yahoo Finance Hong Kong - “In-depth Analysis of Investment Value of Pop Mart After Surge of Over 200%” (https://hk.finance.yahoo.com/news/深度分析泡泡瑪特爆升逾200-後投資價值-020500304.html)

[2] Yahoo Finance Hong Kong - “Hidden Worries Behind HK$430 Billion Market Cap! Pop Mart’s Quarterly Revenue Surges 204%” (https://hk.finance.yahoo.com/news/4300億市值背後的隱憂-泡泡瑪特單季營收暴漲204-但焦慮更重了-020022533.html)

[3] Zhihu - “How to Evaluate Pop Mart?” (https://www.zhihu.com/question/314026442)

[4] Zhihu - “What Do You Think of Pop Mart’s IPO?” (https://www.zhihu.com/question/399192627)

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:

• Top left: Stock price trend and valuation drivers, showing rise from HK$20 at the start of 2024 to current HK$200.20, YTD increase of 119.64%
• Top right: IP portfolio structure, Molly and Labubu as top IPs contributing main revenue, Molly maintaining 76% annual growth
• Bottom left: Financial health radar chart, ROE 54.52%, net profit margin 30.32% etc. perform excellently
• Bottom right: Moat comparison with Tencent Games, Pop Mart stronger in monetization ability, Tencent stronger in user stickiness and IP reserve