Weak Early Feedback for Labubu 4.0; Deutsche Bank Maintains Sell Rating on Pop Mart
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Weak Early Feedback for Labubu 4.0; Deutsche Bank Maintains Sell Rating on Pop Mart
Deutsche Bank believes the launch feedback for THE MONSTERS Hair Salon indicates rising risk of weakening momentum in Pop Mart's core IP, and maintains its Sell rating and HK$140 target price.
- The Hair Salon series was launched online in China on June 25 and offline on June 26, with blind boxes priced at RMB159; although the company did not confirm whether it belongs to Labubu 4.0, the launch timing and marketing resources indicate it is a key new product for the year.
- On launch day, only 2 to 3 of the 7 designs traded at a premium in the secondary market, including the secret edition; some regular editions were clearly below the official retail price, with two unpopular designs at about RMB107.
- Inventory on Douyin and Taobao/Tmall did not sell out immediately, and the report roughly estimates first-day sales momentum at only about 30%-50% of major new IP launches earlier in 2026.
- Social media feedback weakened, with users viewing the design as weaker and innovation as limited, suggesting collectors may be becoming more rational and selective.
- Deutsche Bank forecasts 2026 revenue to decline 2% year-over-year and net profit at RMB1.15bn, while maintaining its Sell rating and HK$140 target price.
Report interpretation
Overview
This report is a company update by Deutsche Bank on Pop Mart (9992.HK), focusing on market feedback following the launch of the THE MONSTERS Hair Salon series. The report believes that despite strong marketing support such as World Cup-related exposure and endorsement from Lisa, the new product still showed insufficient secondary-market premiums, relatively slow sell-through on e-commerce channels, and weakening social-media sentiment, indicating that Labubu-related IP may be entering a more fragile phase.
Core views
The core view of the report is that the market remains overly optimistic on Pop Mart, but data from the new product launch suggests rising risk of demand fatigue. If restocking increases later, secondary-market prices may face further pressure, weakening the market's perception of Labubu's scarcity. Deutsche Bank believes the market has not fully priced in the operating deleveraging caused by weaker sales and declining same-store sales, and therefore maintains its Sell rating.
Analysis framework
The report cross-validates multiple early signals after the new product launch, including secondary-market prices, first-day sales momentum on Douyin and Taobao/Tmall, social-media sentiment, and the potential impact of subsequent restocking on scarcity; for valuation, it uses the DCF method with P/E as a cross-check.
Methodology notes
Discounted cash flow
The report uses a 2% risk-free rate, 1.1 beta, 6% market risk premium, and 7.9% WACC to value Pop Mart using DCF.
P/E cross-check
The report uses the P/E method as a cross-check, and the DCF target price implies 14x 2026 P/E.
Judging IP popularity through launch pricing, sell-through rate, and social media feedback
The report treats secondary-market premiums, whether e-commerce inventory sells out quickly, and social-media views on design and innovation as early indicators for judging the resilience of Labubu demand.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Pop Mart (9992.HK)Research coverage target; Hong Kong-listed equity asset
- Strengths
- A leader in China's designer toy market, with owned products contributing more than 90% of revenue; THE MONSTERS (Labubu) has global recognition, and the company's global store network exceeded 700 stores by the end of 2025.
- Weaknesses
- Hair Salon launch feedback was weaker than expected, regular editions saw discounts, e-commerce inventory did not sell out immediately, and social media feedback weakened.
- Comparison
- Compared with previous popular new IP launches such as Twinkle Twinkle, where most editions traded at a premium in the first few days, only 2 to 3 of the 7 editions this time traded at a premium on day one, and first-day online sales momentum was only about 30%-50% of prior major new IP launches.
- Risks
- IP demand fatigue, declining Labubu scarcity, pressure on same-store sales, operating deleveraging, and insufficient market reaction to weakening sales.
- THE MONSTERS / Labubu Hair Salon seriesNew product related to the core IP and a sample for observing demand
- Strengths
- Supported by World Cup-related exposure and endorsement from Lisa before launch, with high expectations from the market and investors.
- Weaknesses
- Even at the launch stage, it already showed insufficient secondary-market premiums, discounts on unpopular editions, and negative social media feedback.
- Comparison
- In the initial window when limited supply would normally support resale prices, price performance this time remained weak, making it more fragile than previous hot IP launches.
- Risks
- If subsequent restocking increases, price pressure may expand further and affect market confidence in future IP launches.
Key data
- RatingSellDeutsche Bank maintains its sell rating.
- Target priceHK$140Based on DCF valuation and cross-checked with P/E.
- 2026 revenue forecast-2% YoYThe report believes sales pressure will rise from 2Q onward due to a high base.
- 2026 net profit forecastRMB1.15bnThe report expects more evident operating deleveraging.
- Hair Salon blind box pricingRMB159Launched online in China on June 25 and offline on June 26.
- Secondary-market price of unpopular editionsabout RMB107Below the official retail price of RMB159, indicating discounts on some regular editions.
- First-day online sales momentumabout 30%-50% of major new IP launches earlier in 2026Based on rough estimates from Douyin and Taobao/Tmall.
- Company store networkmore than 700 stores by the end of 2025Described in the company profile as the scale of its global retail network.
- Valuation assumptionsRisk-free rate 2%; beta 1.1; market risk premium 6%; WACC 7.9%Key assumptions in the DCF model.
Impact & implications
If subsequent restocking of Hair Salon leads to more ample online and offline supply, secondary-market prices may continue to come under pressure, reinforcing perceptions that Labubu's scarcity is fading. The report believes this would not only affect sales of a single series, but also weaken investor confidence in Pop Mart's ability to continue creating future IP momentum, while amplifying the risk of operating deleveraging amid declining sales.
Risks
- If global sales momentum of existing IP exceeds expectations, it would represent upside risk to the Sell view.
- If a new blockbuster IP is launched earlier than expected, it could improve revenue expectations and valuation.
- If the Labubu movie or other innovative product categories progress strongly, they could reignite IP popularity.
- If secondary-market prices fall further after restocking, market concerns over fading Labubu scarcity and demand fatigue may deepen.
- Sales decline may lead to more evident operating deleveraging, especially if same-store sales in both China and overseas remain under pressure.
What to watch
- Changes in secondary-market prices, discount magnitude, and secret-edition premiums after subsequent restocking of Hair Salon.
- Actual sell-through pace on Douyin, Taobao/Tmall, and offline channels.
- Changes in social-media discussion around design innovation, collectible value, and Labubu's scarcity.
- Whether revenue, same-store sales, and margins from 2Q onward validate operating deleveraging pressure.
- Progress of new IPs, the Labubu movie, and other innovative product categories.