Pop Mart: A Deep Long-Term Value Study

Hunting ten-year five-baggers among great growth stocks — pressing the upside question: "Can it get much bigger?"

• QHow large is its market ceiling? Is it enlarging an existing pie, or creating an entirely new market?6/10

  A

  The market ceiling is not low, but this is mainly a story of enlarging and cross-culturally replicating an existing pie, rather than creating a brand-new category from nothing. The pie of collectible toys, character economics, and emotional/gifting consumption has existed for a long time. Sanrio, Bandai, and Disney merchandise have been doing this for decades. Pop Mart's real innovation is the combined playbook of blind-box distribution, proprietary artist IP, direct-to-consumer retail, and social sharing, which turned designer toys from a niche circle into a global mass-market popular category. From Baillie Gifford's “5x in 10 years” lens, the key question is not whether it invented a new market, but how large this existing pie can become under its hands, and how much share it can take.

  The upper bound of the ceiling comes from the depth of globalization. According to Pop Mart's 2025 annual report, the company generated RMB 37.12 billion in revenue in 2025, up 184.7% year on year, of which overseas revenue was RMB 16.268 billion and the overseas mix had risen to 43.8% (only about 31.8% in 2024). The report disclosed revenue of RMB 20.85 billion, RMB 8.01 billion, RMB 6.81 billion, and RMB 1.45 billion from China, Asia-Pacific, the Americas, and Europe and other regions respectively, with the Americas, Europe and other regions, and Asia-Pacific growing 748.4%, 506.3%, and 157.6% year on year. In other words, Pop Mart is only just getting started in Europe and the United States, the two largest consumer markets in the world, and its base there remains very small. That is the core imaginative space behind a ceiling that has not yet been reached. In a blue-sky scenario, if it can replicate China's store density and repeat-purchase dynamics in Europe and the United States, another order-of-magnitude increase in overall scale is not fantasy.

  But two real boundaries must be stated honestly. First, the “mass-market” potential of this pie itself has a ceiling. However popular collectible and emotional consumption becomes, its penetration is unlikely to match daily necessities, and the heat around any single character is cyclical. The report itself notes that 2025 growth “largely came from the breakout phenomenon of THE MONSTERS/LABUBU,” with THE MONSTERS alone contributing RMB 14.16 billion of revenue, or 38.1%. That means a considerable part of the “ceiling” seen today has been temporarily pushed higher by one super hit. Second, while it is enlarging the pie, counterfeits are eroding its boundaries. Media have even given counterfeit Labubu a specific name, “Lafufu.” In July 2025, Pop Mart sued 7-Eleven and its California franchisees in the United States over alleged counterfeit sales, and the U.S. Consumer Product Safety Commission has issued a safety warning on imitation dolls. This shows that the pie it is enlarging is easy to free-ride on. The moat rests more on continuous new releases and brand mindshare than on category exclusivity itself.

  Conclusion: the ceiling is high enough to support the scale of a world-class IP consumer company, but this is a story of “enlarging and globalizing an existing pie,” not of “creating an unprecedented new market.” The sustainable enlargement of this pie depends heavily on whether Pop Mart can convert the dividend from a single blockbuster into structural penetration across multiple IPs and multiple regions.

  Jun 11, 2026
• QCan its revenue at least double over the next 5 years? Will growth mainly be driven by volume, price, or new businesses?6/10

  A

  Revenue is very likely to double over the next 5 years, and the hurdle is not especially high. The quality and slope of that doubling, however, depend heavily on whether the company can move beyond dependence on a single blockbuster. The main driver will be “volume” (global store expansion plus penetration into new regions), with “price” and “new businesses” playing secondary roles. Starting from an already sizable revenue base of RMB 37.12 billion, doubling in 5 years requires a compound annual growth rate of about 14.9%. That is far below the explosive growth of recent years, so the question is not “can it double,” but whether it can keep growing gracefully after it doubles.

  Start with the confidence implied by the near-term slope. Multiple disclosures show that Pop Mart's revenue grew 75%-80% year on year in Q1 2026, with mainland China up 100%-105%, the Americas up 55%-60%, and Europe up 60%-65%. Management's official guidance for full-year 2026 was growth of “not less than 20%”. The contrast matters: actual Q1 growth was far above full-year guidance, which suggests the company is proactively managing expectations for a slowdown. Even on the conservative official framing, however, the low overseas base makes cumulative doubling over 5 years highly probable.

  In terms of growth structure, “volume” is the clear main force among the three factors. Volume: the report discloses 445 retail stores and 2,396 roboshops in China, while overseas stores are still expanding rapidly. Revenue in the Americas and Europe and other regions grew 748.4% and 506.3% year on year in 2025. Most of the incremental growth over the next 5 years will come from “new stores x consumers in new regions x repeat purchases,” a classic channel rollout driver. Price: pricing power is real but limited. Gross margin rose from 61.4% in 2021 to 72.1% in 2025, reflecting IP premium, but management has already flagged that raw-material costs in 2026 (PVC, fabrics, packaging) will rise by 3-5 percentage points and drag overall gross margin by about 0.5 percentage points. The room to “drive revenue through price increases” is therefore limited. New businesses: theme parks, IP experiences, and digital entertainment remain supporting roles. The report shows proprietary products already account for 99.1% of revenue, so new businesses are unlikely to become the main engine of a doubling in the short term; they are more likely to be auxiliary monetization that extends IP lifecycles.

  The key risk is that the sustainability of “volume” is tied to blockbusters. Plush product revenue surged from RMB 2.83 billion in 2025 to RMB 18.71 billion, with its mix jumping from 21.7% to 50.4%, and the category's breakout was highly synchronized with Labubu. If THE MONSTERS cools materially over the next 2-3 years and SKULLPANDA, CRYBABY, MOLLY, DIMOO, and others fail to take over, “doubling” could deteriorate from “easily achieved within 5 years” to “requiring 5 years or longer, with margin pressure along the way.”

  Conclusion: a 5-year revenue doubling is the high-probability baseline case, with the main engine being “volume” expansion from global stores and new regions. But the real investor bet is not whether revenue can double; it is whether the revenue structure during that doubling can shift from “propped up by one blockbuster” to balanced growth across “multiple IPs x multiple regions.” The former is already priced by the market; the latter is where the odds lie.

  Jun 11, 2026
• QAfter 5 years, what will take over as the next growth engine? Does this “second curve” exist today?4/10

  A

  The most likely “second curve” after 5 years is a globalized multi-IP matrix plus cross-format IP monetization (parks/content/licensing). This curve already has an outline today, but it is far from proven as an independent growth engine and is still largely parasitic on the main curve: designer-toy products plus Labubu. For a Baillie Gifford-style investor, the essence of this question is whether the next engine has already ignited when THE MONSTERS, the current main engine, slows down. The current answer is: it has ignited, but it is not roaring yet.

  The first candidate second curve is the multi-IP matrix moving from “single-core” to “multi-core”. This is the line with the clearest evidence today. The report discloses that in 2025 the company had 6 IPs with revenue above RMB 2 billion and 17 IPs above RMB 100 million, forming a ladder that includes THE MONSTERS, SKULLPANDA, CRYBABY, and MOLLY. But the honest caveat is that this “multi-core engine” is currently imbalanced. THE MONSTERS alone accounts for 38.1% of revenue (RMB 14.16 billion), while the other IPs are not on the same scale. The real marker of an established second curve would be a non-Labubu IP independently growing into a several-billion-yuan franchise with cross-regional replicability. The report judges this as still under verification and lists “whether SKULLPANDA, CRYBABY, MOLLY, DIMOO, and others can continue to take over” as a core investment assumption.

  The second candidate is cross-format IP monetization: theme parks, IP experiences, and digital entertainment. The report notes that the company has built an integrated platform spanning “IP incubation and operations, designer toys and retail, theme parks and IP experiences, and digital entertainment,” while CNBC has also specifically discussed how Pop Mart could turn IP into a more durable business model after Labubu. But the same cold water is needed: in 2025, proprietary products, meaning designer-toy merchandise, still accounted for 99.1% of revenue, and the revenue contribution from parks and content is almost invisible financially. This means the curve exists at the level of imagination but has not yet shown up in the accounts. Compared with the evergreen cash flows Sanrio and Bandai have built through long-lived characters plus licensing/content, Pop Mart still needs to pass the two hurdles of time and verification.

  The third candidate is the global market itself as a second curve: transplanting the China playbook to Europe and the United States. Overseas already contributed RMB 16.268 billion, or 43.8%, in 2025, and the bases in the Americas and Europe are extremely low while the slope is extremely steep. Strictly speaking, this is a geographic extension of the main curve (selling products), rather than a brand-new engine. But because the increment is large enough and its cycle is not fully synchronized with China, in practice it can function like a second curve that extends the flight range on a staggered timeline.

  Conclusion: the second curve “exists but is immature” today. The multi-IP matrix has been laid out but remains single-core and imbalanced; parks/content/digital entertainment are nearly zero in the accounts; globalization looks more like a geographic extension of the main curve. Put differently, Pop Mart is an aircraft with an extremely powerful main engine and a backup engine still warming up. Whether it can bring the second engine to sufficient power before Labubu slows is the decisive factor in upgrading this investment from an “excellent pop-culture event” to a “great long-term growth stock.” That is precisely the part current prices have not fully priced, and that cannot yet be proven.

  Jun 11, 2026
• QWhat is its core competitive advantage? Will this moat widen or narrow over the next 3 to 5 years?5/10

  A

  The core competitive advantage is the interlocking of four capabilities: proprietary artist-IP incubation and operation, high-margin commercialization, a strong direct-to-consumer channel, and global execution. Over the next 3 to 5 years, the moat is likely to “widen overall, but with the central stretch increasingly dependent on THE MONSTERS handoff being validated.” Whether it widens or narrows depends on whether the multi-IP matrix can fix the weakness of single-core imbalance. This is a moat that truly exists but has not yet crossed a full cycle. Its strength is moderately above average, but not yet strong enough for blind 10-year ownership.

  Break the moat into four pillars, all supported by operating data. IP incubation and commercialization: proprietary products account for 99.1% of revenue and artist IP accounts for 90.0%, showing that the company controls the upstream of the value chain and is not merely a channel merchant selling other people's goods; gross margin rose from 61.4% (2021) to 72.1% (2025), and operating margin rose to 45.5%, proving that the IP premium is real money. DTC channel: 445 retail stores and 2,396 roboshops in China, with overseas directly operated outlets plus self-operated apps/websites plus TikTok/Shopee running in parallel; the report rates its “channel advantage” as strong. Global execution: China, Asia-Pacific, the Americas, and Europe all broke out in 2025, with revenue in the Americas and Europe and other regions growing 748.4% and 506.3% year on year respectively, validating organizational execution. Brand mindshare: THE MONSTERS has become a global character, generating RMB 14.16 billion in revenue, and 17 IPs have exceeded RMB 100 million in revenue.

  But this moat has two naturally thin walls that must be stated honestly. First, switching costs are weak. The report explicitly judges that “consumers can switch IPs and brands; what really keeps customers is character appeal.” This is not a lock-in moat like software or social networks. It is an attention moat maintained by continuously pleasing consumers. Second, the so-called “network effect” is really a social-spread effect, not a platform-style two-sided network. Heat can arrive quickly and leave quickly. These two points mean its moat ceiling is below businesses with institutional barriers such as licenses, standards, or closed-loop data.

  Looking at the next 3 to 5 years, the key is the race between “width” and “concentration.” Forces that widen it: the brand has begun cross-cultural replication, overseas mix has risen from about 31.8% to 43.8%, and multiple regions and multiple IPs are being rolled out at the same time. If the “17 IPs above RMB 100 million” can become a more balanced multi-IP matrix by 2027-2028, the moat will widen materially. Risks that narrow it: THE MONSTERS alone accounted for 38.1% of 2025 revenue. The report states directly that “the width of the moat is still largely tied to blockbuster durability... if it cannot hand off, the river that looks wide today may just be high tide.” In addition, counterfeit proliferation (called “Lafufu” by media) is eroding brand scarcity, and Pop Mart has continued to invest in anti-counterfeiting and sue counterfeit-selling channels. The moat needs to be reinforced through constant legal and brand investment, rather than being naturally stable.

  The comparison set makes the picture clearer. The report uses Sanrio's FY3/2025 operating margin of 35.8% and ROE of 48.6% and Bandai Namco's durable IP matrix as benchmarks, noting that Pop Mart has “faster growth, but a shorter period of verification for character longevity and the business model's ability to cross cycles.” Sanrio's decades-long licensing model around Hello Kitty is exactly the endgame Pop Mart wants to prove it can replicate, but has not yet proven.

  Conclusion: the four moat pillars interlock, and the overall direction is wider, but “the core stretch is tied to a single blockbuster plus naturally weak switching costs” is the most concrete gap between Pop Mart and Sanrio/Bandai. Over the next 3 to 5 years, the moat is more likely to keep widening, but that widening is conditional and requires ongoing verification; it is not already locked in. This is the fundamental reason the report assigns “moat strength 3/5” and “durable moat: uncertain.”

  Jun 11, 2026
• QIf the core business is disrupted, does it have the genes for self-reinvention? How does it deal with mistakes and bad news?5/10

  A

  Pop Mart shows some “self-reinvention genes.” It is itself the product of a transformation from an ordinary designer-toy variety retailer into an IP operating platform, meaning the organization has already completed one successful paradigm shift. But those genes have not truly faced a life-or-death test on the scale of a “core blockbuster collapse.” In its treatment of mistakes and bad news, management has so far appeared relatively candid and has not avoided slowdown or cost-pressure issues, which is a positive. But the highly concentrated governance structure leaves this correction mechanism short of external checks and balances. For a Baillie Gifford-style investor, the question is: when Labubu, the main engine, one day shuts down, will this company reinvent itself, or ebb away with the blockbuster? Current evidence leans positive, but is insufficient.

  Start with the evidence for “self-reinvention” genes. Pop Mart's most convincing reinvention was its evolution from a “retail store selling other people's toys” into “a platform that incubates artist IP and commercializes it globally.” The report notes that the company has built an integrated platform spanning “IP incubation and operations, designer toys and retail, theme parks and IP experiences, and digital entertainment,” with proprietary products reaching 99.1% of revenue and artist IP reaching 90.0%. This shift from channel merchant to upstream IP owner itself proves the organization has successfully disrupted itself once. At the same time, the company's IP playbook is not to bet on a single character, but to incubate on a rolling basis. In 2025, 6 IPs had revenue above RMB 2 billion and 17 IPs exceeded RMB 100 million. This mechanism of constantly launching new characters is, in theory, an endogenous antibody against the lifecycle of a single IP.

  But the effectiveness of that antibody has not yet been stress-tested. The real question is: if THE MONSTERS (accounting for 38.1% of revenue) suffers a cliff-like loss of heat, can the remaining IPs fill a ten-billion-yuan gap within 2-3 years? The report admits this remains a “key assumption that needs verification.” In other words, the reinvention gene is present, but the biggest test it faces (the fading of the core blockbuster) has not yet occurred. We can only say it has a record of successful transformation in a narrower setting, not that it has proven it can survive disruption of the main business.

  On “how it deals with mistakes and bad news,” recent performance is reasonably good. First, it has proactively cooled market expectations and has not treated high prosperity as permanent: according to the Reuters May 2026 coverage cited by the report, the company has reminded analysts that 2026 margins will be affected by rising costs, and as the global Labubu frenzy cools, it has shifted focus back to retail standardization and cultural-entertainment expansion. Management guided only for conservative 2026 growth of “not less than 20%”, instead of continuing to promise triple-digit growth. Second, it has faced bad news (counterfeits) directly: in response to the “Lafufu” counterfeit wave, the company has increased anti-counterfeiting investment, used QR codes/UV stamps/holographic stickers for authentication, and sued counterfeit-selling channels in the United States. These actions show that management does not avoid problems and is willing to acknowledge that growth will normalize.

  However, the “checks and balances” in the correction mechanism are missing. The report notes that founder Wang Ning holds 48.73% of the shares and serves as both chairman and chief executive officer. The combination of chairman and CEO means power is highly concentrated. This structure is efficient when the company needs fast decisions on new content, but when the company misreads direction, there is no strong external board to step on the brake or correct course. Error correction depends more on the founder's own clarity than on institutions. The report therefore lists governance as a reservation and includes “management starting high-priced acquisitions or frequent buybacks at elevated prices” among warning signs that would overturn the investment thesis.

  Conclusion: Pop Mart has self-reinvention genes (a successful transformation from channel merchant to IP platform plus a rolling incubation mechanism), and its recent attitude toward mistakes and bad news has been candid and pragmatic. Both are real positives. But these genes have not yet gone through the ultimate test of a core blockbuster collapse, and highly concentrated governance leaves error correction without external checks. It is more like a growth company that has shown the potential for resilience, but has not yet earned a diploma for crossing cycles.

  Jun 11, 2026
• QDoes management, especially the founder, have a long-term view and deeply aligned interests with the company? Is it willing to sacrifice current profits for 5 to 10 years from now?7/10

  A

  Founder Wang Ning's interests are deeply aligned with the company, and his long-term vision is clear. This is an unambiguous positive. But the evidence that he is willing to “sacrifice current profits for 5 to 10 years from now” is weaker. The company is currently at a profit peak and has not truly gone through a trade-off where it actively suppresses short-term profits for a longer-term position. The chairman/CEO combination also leaves this long-termism without sufficient checks. Overall: strong alignment, visible long-term vision, but willingness to sacrifice remains unproven. This is one of Baillie Gifford's most important questions: is the founder thinking like an owner or like a professional manager? Pop Mart scores highly on alignment, while self-restraint remains a question mark.

  Interest alignment is the company's hardest positive. According to Pop Mart's 2025 annual report and multiple disclosures, as of December 31, 2025, founder Wang Ning was deemed to hold about 654 million shares, or 48.73% of total share capital, while also serving as executive director, chairman, and chief executive officer. A near-half ownership stake means his net worth breathes with the share price. When the stock moved sharply after the 2025 results, Wang Ning's personal wealth also shrunk by tens of billions of yuan. This structure, in which the owner has placed the vast majority of his wealth in his own company's shares, is exactly the founder trait Baillie Gifford prefers: decisions are more likely to be made like an owner than like an employee.

  The long-term vision is also visible. Several recent management actions point to “not maximizing short-term numbers”: first, in 2026 it guided only for growth of “not less than 20%”, proactively lowering market growth expectations rather than continuing to draw a triple-digit-growth picture; second, it shifted strategic focus from simply chasing Labubu's heat toward retail standardization and cultural-entertainment expansion, with Wang Ning publicly emphasizing that “there has been no overconsumption of IP this year.” That posture leaves room for IP longevity and avoids exhausting the well.

  But evidence of “sacrificing current profits for the long term” is not sufficient, and that must be acknowledged. The reason is that Pop Mart is currently at a historical high in profitability: operating margin rose from a 2022 low of 12.6% to 45.5% in 2025, and net margin reached 34.4%. It has not yet encountered a real scenario requiring it to “actively sacrifice profits for long-term territory,” such as heavily burning store investment and sharply lowering margins to capture Europe and the United States. The report instead notes that overseas expansion has already pushed inventory from RMB 1.52 billion to RMB 5.47 billion, with turnover days rising to 123. This is evidence of putting working capital ahead of growth, but it is more the natural cost of expansion than strategic restraint in “actively giving up profits.” In other words, we have seen willingness to tie up cash for growth, but not hard evidence of willingness to sacrifice the income statement for long-term positioning.

  Governance is the biggest reservation on this question. The report notes that the company maintains a combined chairman and CEO structure, concentrating power heavily. In addition, external audit fees in 2025 were about RMB 5.9 million, while non-audit service fees were about RMB 5.5 million, not a low ratio. Capital allocation also has not fully reflected long-term discipline. The report commends the company's 2023 buyback of 19.947 million shares at a low HK$16.40-21.70 range (a beautiful piece of value creation in hindsight), but in January 2026 the company also repurchased 1.9 million shares at a high HK$177.7-194.9. That “did not have such an obvious margin of safety.” High-priced buybacks show that management does not use shareholder capital only when shares are “clearly undervalued,” leaving some distance from Baillie Gifford's ideal of an extremely disciplined long-term capital allocator.

  Conclusion: Wang Ning's near-half ownership plus clear long-term narrative put “alignment + long-term vision” on solid ground. But “willingness to sacrifice current profits for 5 to 10 years from now” has not been tested in a real scenario, and highly concentrated governance plus insufficient discipline in high-priced buybacks keep this question at “strong alignment, visible vision, unproven restraint.” That is a positive but not perfect judgment, consistent with the report's “management and capital allocation 3/5” assessment.

  Jun 11, 2026
• QIf it disappeared tomorrow, how much would customers miss it? Is its growth model sustainable and not dependent on harming society or regulation?5/10

  A

  If Pop Mart disappeared tomorrow, its core fans would genuinely miss it, but the “degree of missing it” is far below necessities such as water, electricity, or operating systems. It satisfies emotional and collecting needs, so its indispensability is “strong emotional stickiness, weak functional necessity.” In terms of sustainability, its growth model generally does not harm society, but the blind-box model naturally carries regulatory sensitivities around “gambling-like mechanics, addiction risk, and youth consumption,” which must be treated as a long-term variable. On the two-part test of indispensability plus social/regulatory sustainability, Pop Mart is “medium” on the former and “generally sustainable but gray” on the latter.

  Start with “how much it would be missed.” The evidence points to “highly missed by core fans, but replaceable for the mass market.” On one hand, its products satisfy real and durable emotional value. The report says customers are consumers “willing to pay for emotional value, aesthetics, collecting, social spread, and character companionship.” THE MONSTERS has become a global cultural symbol with RMB 14.16 billion of revenue, and Labubu has even triggered global buying frenzies and secondary-market speculation. This emotional connection is scarce. On the other hand, the report also soberly judges that “switching costs are weak: consumers can switch IPs and brands.” Emotional consumption has no functional lock-in; without Pop Mart, consumers would turn to other designer toys and other collectibles. So “missing it” is real, but it is closer to “I would feel sad if a brand I like disappeared,” not “my life cannot function without it.” A telling side proof comes from rampant counterfeiting: counterfeit Labubu dolls (called “Lafufu” by media) have proliferated to the point that the U.S. Consumer Product Safety Commission had to issue a safety warning. This shows that the mass market wants “the Labubu image,” not necessarily “the official Pop Mart version,” and the brand's indispensability is being diluted by imitation.

  Now consider the first side of sustainability: society. Pop Mart's business itself does not harm society. It does not sell addictive substances, does not pollute, and does not exploit (manufacturing is done by third-party suppliers). It provides aesthetics and companionship, making it overall a “harmless self-reward consumption” business. It creates employment and supports the IP creative industry, so its social externalities lean positive.

  But the second side of sustainability, regulation, contains a non-negligible gray area, and this is what the question most needs to state honestly. The core mechanism of blind boxes/draw boxes is that buyers do not know which item they will get before opening. This randomness has a “gambling-like” attribute and can stimulate repeat purchases and impulse spending by minors. Chinese regulators have issued rules for blind-box operations in recent years, including limits on sales to minors, probability disclosure, and price caps. If such rules tighten, they would directly affect the sales intensity of this core distribution method. Overseas, there is also compliance pressure: counterfeits around Labubu in the United States have already become legal issues involving trademark infringement and consumer safety, and Pop Mart has proactively sued counterfeit-selling channels and strengthened authentication. In other words, its growth model does not “harm” society, but it does “stand near” a regulatory red line that requires continuous compliance management. That line is unlikely to kill it, but it could weaken blind-box sales elasticity in a specific region at a specific point in time.

  Conclusion: Pop Mart's indispensability is “high emotional stickiness, low functional necessity.” Core fans would miss it, but it is not a daily necessity, and the brand is being eroded by counterfeits. Its growth model generally does not harm society and has positive externalities, but the “gambling-like + youth consumption” attributes of blind boxes leave it in a long-term regulatory gray zone in China and overseas. This means it passes the baseline of “not doing harm,” but does not have the kind of institutional moat where society and regulators both clearly endorse it. That is also why its moat relies more on product strength than on irreplaceable social necessity.

  Jun 11, 2026
• QHow are the unit economics of this business (gross margin, incremental returns)? Do they improve or deteriorate with scale? Where does the money it earns go?8/10

  A

  The unit economics of this business are excellent: high gross margin, asset-light operations, and high incremental returns. As scale increases, they generally “improve” through significant operating leverage. But a warning inflection point appeared in 2025: growth has begun to consume cash more visibly, and working capital, especially inventory, is diluting the quality of free cash flow. The money earned is mainly spent on “stores and overseas expansion + dividends + buybacks.” Capital allocation is broadly rational, but high-priced buybacks lack a sense of discipline. This is the core Baillie Gifford question on “business quality.” Pop Mart's answer is: first-class unit economics, but the quality of cash conversion is being tested by expansion.

  Start with the unit economics themselves, which are its strongest side. Gross margin is extremely high and continues to rise: gross margin increased from 61.4% in 2021 to 72.1% in 2025, jointly driven by IP premium, a 99.1% proprietary-product mix, and channel-structure optimization. Operating leverage is remarkable: operating margin rose from a 2022 low of 12.6% all the way to 45.5%, and net margin reached 34.4%. This means that as each additional yuan of products is sold, a much larger proportion falls to profit as scale rises. That is a textbook example of “larger scale, better unit economics.” Returns on capital are extremely high: the report estimates 2025 ROE at 77.5% (a rough calculation based on average beginning and ending equity), and the company has no bank borrowings and RMB 13.775 billion of cash on its books. This high return is not levered into existence. Horizontally, its profitability already approaches or even exceeds mature IP giants: Sanrio's FY3/2025 operating margin was 35.8% and ROE was 48.6%, while Bandai Namco's Toys and Hobby segment margin was about 18%. Pop Mart's current margin is even higher.

  But there is an honest “but”: the current 45.5% operating margin is very likely to contain a “super-blockbuster dividend,” not a permanently replicable normal state. Management has already flagged that raw-material costs in 2026 (PVC, fabrics, packaging) will rise by 3-5 percentage points and drag overall gross margin by about 0.5 percentage points. The report therefore emphasizes that “2025 should not be treated as a permanent normal.”

  Now look at incremental returns and cash conversion, where 2025 showed signs of an inflection point. The report notes that operating cash flow was clearly above net profit in 2023 and 2024 (profits were not hollow), but “growth began to consume cash” in 2025: disclosed FCF still reached RMB 9.69 billion, but it was already below RMB 12.78 billion of net profit because inventory, receivables, and overseas expansion absorbed more working capital. The most glaring item was inventory, which surged from RMB 1.52 billion to RMB 5.47 billion, while turnover days rose from 102 to 123. On this basis, the report uses a more conservative approach (adjusting IFRS 16 lease cash flows and additionally deducting about RMB 800 million of lease principal) to calculate “conservative owner earnings of about RMB 8.9 billion,” clearly below net profit. The message for investors is that accounting profit is beautiful, but the cash shareholders can truly receive deserves a haircut. Beyond “unit economics improve with scale,” one must add the warning that “cash quality is being diluted by expansion.”

  Finally, where does the money go? There are three destinations. First, expansion: capital expenditure in 2025 was RMB 1.172 billion, while the larger part went into store rollout, overseas channels, and inventory. Growth is still mainly funded by endogenous reinvestment. Second, dividends: the dividend policy is annual payouts of no less than 20% of distributable net profit. In 2025, the proposed final dividend was RMB 2.3817 per share, totaling about RMB 3.194 billion, corresponding to a dividend yield of about 1.8%, showing willingness to return cash to shareholders. Third, buybacks: in 2023 it repurchased 19.947 million shares at a low HK$16.40-21.70 range (excellent in hindsight), but in January 2026 it repurchased another 1.9 million shares at a high HK$177.7-194.9. The report's assessment is that “high-priced buybacks did not have such an obvious margin of safety,” pulling capital allocation back from “excellent” to “above-average pass.”

  Conclusion: Pop Mart's unit economics are a rare good business: high gross margin, asset-light operations, high incremental returns, and real operating leverage from scale. But the inflection point of “growth consuming cash” has already appeared since 2025. Cash-conversion quality under inventory and lease accounting needs continued verification, while the 45.5% margin may contain blockbuster benefits and high-priced buybacks lack discipline. So this is a good business with “first-class unit economics, but question marks around cash quality and profit sustainability,” corresponding to the report's sub-judgment that “returns on capital pass, stable free cash flow uncertain.”

  Jun 11, 2026
• QFor it to rise 5x in 10 years, what conditions must hold at the same time? Are those conditions realistic? What expectations are embedded in today's share price?3/10

  A

  For Pop Mart to rise 5x in 10 years, two things must hold simultaneously: profit must grow about 4x over 10 years (about 17-18% annualized) and the valuation multiple must not contract. Against the backdrop of an already historic high profit margin and a share price that has risen more than 10% since the report snapshot, this set of conditions is optimistic and not easy. Today's share price already embeds optimistic expectations that “most of the Labubu dividend normalizes + multi-IP handoff succeeds + globalization keeps singing.” The margin of safety is thin. The essence of this question is to break “5x in 10 years” into falsifiable conditions and compare them with today's valuation. The conclusion is: whether it can 5x is uncertain, and today's price is already not cheap.

  Start by laying out the simultaneous conditions required for “5x in 10 years.” A 5x return is approximately a 17.5% annualized share-price compound return. Assuming no valuation expansion, this requires net profit to grow about 4x over 10 years, or about 17-18% annualized. To achieve that, several key assumptions listed in the report must all come true: ① THE MONSTERS must move from a “blockbuster” to a “long-lived IP,” rather than a flash in the pan; ② SKULLPANDA, CRYBABY, MOLLY, DIMOO, and others must continue to take over, turning today's single-core imbalance at 38.1% of revenue into a balanced multi-IP matrix; ③ overseas markets (the Americas and Europe) must convert short-term high growth into stable repeat purchases, rather than a one-wave event; ④ even if long-term operating margin falls back from 45.5% in 2025, it must remain far above ordinary retail. If any one of these four breaks, the 10-year 5x fails.

  The difficulty is that these conditions require “multiplying again from a high base,” which is harder than “taking off from a low base.” Pop Mart already achieved RMB 37.12 billion of revenue in 2025 and profit for the year of RMB 12.776 billion (up 308.8% year on year), with margins at historical highs. The report repeatedly warns that “2025 margins may not be sustainably replicable,” management has flagged that rising 2026 costs will pressure margins, and 2026 growth guidance is only “not less than 20%”. From a starting point of “high-water margins + a single blockbuster lifting the business + growth shifting down,” another 4x profit increase over 10 years requires more than a tailwind. It requires multiple good things at once: the blockbuster does not fade, new blockbusters keep emerging, and globalization does not stumble. This is possible in a blue-sky scenario, but it is not a calm baseline delivery. Honestly, it is an optimistic path that “needs everything to go right.”

  Now look at what today's share price embeds. The price baseline from the report needs to be updated: the report was written on May 19, 2026 and anchored at HK$152.90, but as of June 10-11, 2026, Pop Mart's share price had risen to about HK$175.80, with a market value of about HK$22.9 billion (which should be HK$228.6 billion), up about 13-15% from the report snapshot. This means the report's then judgment of “near the lower half of the neutral intrinsic-value range” needs to be moved up accordingly. Based on the report's intrinsic-value ranges (conservative HK$100-125, reasonable HK$130-170, optimistic HK$180-230), the current HK$175 price is already at the upper end of the reasonable range and approaching the lower end of the optimistic range. In other words, the market's current pricing has already pulled forward a meaningful portion of the report's optimistic scenario (multi-IP handoff + continued improvement in overseas efficiency).

  The absolute-return angle confirms the same point. The report estimates the current U.S. 10-year Treasury yield at about 4.62%, while Pop Mart's earnings yield on conservative owner earnings (about RMB 8.9 billion) is only about 5%. After the share price has risen another 10%, that compensation is even thinner. The report therefore judges that “the margin of safety is not obvious... it looks more like a name waiting for better odds,” and gives a more comfortable buying range of HK$95-120 and a clearly overvalued range above HK$190. At around HK$175 today, it is already well above the ideal entry point and moving toward the overvalued range.

  Conclusion: a 10-year 5x requires “17-18% annualized profit growth for 10 consecutive years + no valuation contraction + all four key assumptions holding at once.” This is an optimistic path that “needs everything to go smoothly,” not a solid baseline outcome. Today's roughly HK$175 share price has already priced in most of the good outcomes: normalization of the Labubu dividend, successful multi-IP handoff, and continued high globalization growth. It sits in the report's “upper reasonable, near overvalued” zone, with a very thin margin of safety. For a Baillie Gifford-style investor, this means the company's quality is good enough for the watchlist, but the odds at the current price do not support the claim that “now is the calm buying point for a 10-year 5x.”

  Jun 11, 2026
• QWhy has the market not realized all this yet? Is it because investors do not understand it, look down on it, or cannot look far enough? What will become the “narrative inflection point”?3/10

  A

  For Pop Mart, Baillie Gifford's signature question of “why hasn't the market realized this yet” partially fails. This is not an overlooked, misunderstood company. Quite the opposite: it is a super-IP story that the market has already fully seen and heavily debated. Today's real disagreement is not “whether it is good” (that is widely recognized), but whether “2025's high margin and the Labubu dividend are normal.” This is “not looking far enough” (a disagreement over IP lifecycle), not “not understanding” or “looking down on it.” Narrative inflection points will be triggered by several observable operating indicators, and they can move either up or down. The honest answer to this question is that Pop Mart does not fit the classic “hidden pearl” setup. It is more like a highly visible bet under full market attention.

  Start by clearing the premise: this is not a company the market “does not understand” or “looks down on.” The evidence is direct: 21 analysts rate it Buy and 3 rate it Sell, with an overall Buy rating; sell-side coverage is dense, and Morgan Stanley, Deutsche Bank, and others have been actively adjusting target prices; its results can trigger sharp one-day share-price moves (after the 2025 annual report, the stock once fell more than 30%); and Labubu itself is a global cultural phenomenon. A company repeatedly appearing in financial headlines, watched closely by dozens of institutions, and priced with the report's “optimistic scenario” already partly pulled forward (the current price of about HK$175.80 is already near the lower end of the report's optimistic range) is clearly not an overlooked bargain. So Baillie Gifford's premise that “the market has not realized it yet” does not hold here. The report sets the tone at the beginning: “what you are buying today is not an overlooked asset, but a super-IP story that has already been fully seen.”

  Where, then, is the market's real disagreement, the part of “not looking far enough”? It lies in whether 2025's profitability is a “new normal” or a “high-water mark”. Bulls treat the 45.5% operating margin, Labubu's global frenzy, and triple-digit overseas growth as sustainable structural capabilities. Bears focus on three things: THE MONSTERS' single-IP dependence at 38.1% of revenue, the possibility that 2025 margins were peak margins, and the cash-quality concern from inventory surging from RMB 1.52 billion to RMB 5.47 billion with turnover at 123 days. The report captures the short thesis precisely: “investors may well mistake popularity for a moat and high prosperity for normal profitability.” That is the real battlefield: not whether the company is good, but how long this goodness can last. It is a forward-looking disagreement over IP lifecycle, pure “not looking far enough.”

  Next comes the key addition to this question: what will become the narrative inflection point. The inflection points are two-way and will be triggered by observable indicators:

  Downward inflection points (repricing it from a “globalized IP company” back into a “high-volatility designer-toy brand”): ① THE MONSTERS growth loses speed materially, with no new super IP emerging from the “17 IPs above RMB 100 million”; ② operating cash flow trails net profit materially for 2 consecutive reporting periods, while inventory turnover continues to worsen; ③ overseas revenue still grows, but same-store efficiency and margins fall quickly, showing expansion has “quantity without quality”; ④ rising raw-material costs combine with promotions, causing margins to step down materially from high levels. The report warns that the most dangerous market reaction to such signals is not short-term volatility, but a repricing from “globalized IP company” to something lower. At that point, valuation and profit could suffer a double hit.

  Upward inflection points (proving the narrative of “the next world-class IP company”): ① a non-Labubu IP independently grows into a several-billion-yuan franchise and can be replicated across regions, proving that “creating blockbusters” is a repeatable system capability rather than luck; ② stores in Europe and the United States maintain high same-store sales after the base becomes larger, turning traffic into stable repeat purchases; ③ cross-format monetization such as parks/content/digital entertainment starts contributing visible revenue, extending single-product sales into evergreen IP cash flows. Once these occur, the market would shift its valuation anchor completely from “designer-toy retail” to a “Sanrio/Bandai-style long-lived IP platform.”

  Conclusion: Pop Mart is not a name “the market has not realized.” It is a name the market has fully realized and is aggressively betting on. The disagreement is not over quality (not looking far enough, rather than not understanding or looking down on it), but over the sustainability of high margins and blockbuster dividends. Narrative inflection points will be triggered in both directions by Labubu mix and growth, new-IP handoff, inventory and cash flow, and overseas same-store efficiency. These indicators could either push it back to “one great pop-culture event” or lift it toward “the next world-class Chinese IP company.” At the current price, which is already not cheap, investors are not betting on “a secret others have not discovered,” but on which side this widely known debate will ultimately favor.

  Jun 11, 2026