Pop Mart's 1Q26 sales beat expectations; UBS maintains Buy and HK$237.5 target price

Overview

This report is UBS's 1Q26 earnings review of Pop Mart International Group (9992.HK). It notes that overall 1Q26 sales beat expectations, with strong domestic sales as the main driver and overseas sales broadly in line. Management used the earnings call to discuss IP products, theme parks, global organizational reform, and margin pressure. UBS maintained its Buy rating and HK$237.5 target price, but lowered 2026-2028 adjusted net profit forecasts by about 5% after trimming overseas revenue assumptions and reflecting cost pressure.

Core views

The core views are as follows: first, the domestic market remains resilient, and the company will continue to enhance consumer experiences across offline stores and online livestreaming platforms, with flagship-store performance and the store-opening pipeline supporting brand reach. Second, after overseas traffic normalised, the share of local consumers increased and awareness of IPs beyond Labubu improved; the company will strengthen overseas retail, membership systems, and online blind-box capabilities. Third, the IP portfolio is expanding regionally, with Twinkle Twinkle popular in Asia, Skullpanda and Hirono gaining traction in Europe and the US, and Labubu set to launch key products tied to the FIFA World Cup. Fourth, the cost side remains under pressure, with PVC, fabric, packaging, freight, warehousing, labor, and rent potentially weighing on gross margin and net margin. Fifth, global organizational integration should help headquarters support regional operations, promote knowledge sharing, and improve inventory turnover.

Analysis framework

The report analyzes the company using earnings-call information, management guidance, regional revenue assumptions, margin assumptions, and a three-stage DCF valuation model. UBS raised its China revenue assumptions, but lowered revenue forecasts for overseas markets, especially the Americas, Europe, and other regions, and incorporated rising costs and margin pressure into its 2026-2028 earnings forecasts.

Methodology notes

• Valuation methodsThree-stage DCF model

  Deriving target price through discounted cash flow

  UBS used a three-stage DCF model to arrive at a HK$237.5 target price. Although 2026-2028 adjusted net profit forecasts were lowered by about 5%, the target price was unchanged due to updated FX assumptions.

• Rating frameworkUBS 12-month rating system

  The Buy rating is based on forecast stock return relative to the assumed market return, implying outperformance

  UBS defines forecast stock return as the sum of expected price upside over the next 12 months and dividend yield. This report shows a forecast stock return of 49.4%, an assumed market return of 10.9%, and forecast excess return of 38.5%.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Pop Mart International Group 9992.HK

  Covered company

  Strengths

  Strong domestic sales, an expanding IP matrix, a rising share of local consumers overseas, ongoing global operating integration, and sustained net cash growth.

  Weaknesses

  Lower overseas revenue forecasts, rising costs for raw materials, logistics, warehousing, labor, and rent, and an expected year-on-year decline in 2026 adjusted net margin.

  Comparison

  In UBS's new forecast, the China revenue assumption was raised by about 10%-11%, but forecasts for the Americas and Europe/other regions were cut materially, and the 2026-2028 earnings line was lowered by roughly 5%.

  Risks

  Failure of new IPs to attract and retain consumers, tighter regulatory scrutiny on blind-box products, cyclical dependence on a single IP, and profit drag from investments in film, POPUP, and theme park businesses.

Key data

• Target priceHK$237.5DCF target price unchanged.
• RatingBuy12-month rating.
• Forecast price upside47.6%Based on the forecast return assumption.
• Forecast total return49.4%Includes a forecast 1.8% dividend yield.
• 2026E group sales growth+13% yoyChina revenue is expected to rise 28% yoy, while overseas revenue is expected to decline 6% yoy.
• 2026E adjusted net margin change-2.7ppt yoyReflects lower gross margin and higher fixed costs.
• 2026E revenue forecastRmb42,109mThe new forecast is about 1% below the old forecast.
• 2026E adjusted net profit forecastRmb13,438mCut by 5% versus the old forecast.
• 2027E adjusted net profit forecastRmb15,974mCut by 5% versus the old forecast.
• 2028E adjusted net profit forecastRmb18,999mCut by 5% versus the old forecast.
• 2026E gross margin70.6%Down 0.8ppt versus the old forecast.
• 2026E EBIT margin42.0%Down 1.7ppt versus the old forecast.
• 2026E P/E14.0xUBS diluted basis.
• 2026E EV/EBITDA8.7xUBS core basis.
• Market capHK$216b / US$27.6bTrading and key metrics disclosed in the chart.

Impact & implications

The report's investment implication is somewhat positive: domestic demand and IP operations continue to support revenue resilience, overseas markets are shifting from traffic-driven growth to higher local consumer participation and broader IP awareness, and global organizational reform should help improve inventory turnover and regional coordination. However, the downward earnings revision indicates that overseas revenue normalisation and rising costs are compressing near-term margins. If the company can improve overseas operating efficiency through supply chain optimization, product localization, flagship stores, and membership systems, the current valuation can still be supported by relatively high forecast returns.

Risks

• New IPs may fail to continue attracting and retaining consumers.
• Blind-box products may face stricter regulatory scrutiny.
• Reliance on a single IP cycle may lead to fluctuations in revenue and popularity.
• Investments in films, POPUP events, theme parks, and other new projects may weigh on profitability.
• Higher costs for PVC, fabric, packaging, freight, and warehousing may compress gross margin.
• Higher fixed costs such as labor and rent may compress net margin.
• Overseas market traffic normalization and lower revenue forecasts may affect growth expectations.

What to watch

• Subsequent store-opening performance and footfall conversion at domestic flagship stores.
• The share of local consumers overseas, membership-system rollout, and progress on POP NOW's overseas launch.
• Sales performance of Labubu World Cup collaboration products and other key 2H26 products.
• Growth of non-Labubu IPs such as Twinkle Twinkle, Skullpanda, and Hirono across different regions.
• The impact of raw materials, freight, warehousing, labor, and rent on gross margin and net margin.
• Footfall, show optimization, and IP collaboration effects after opening new zones in the theme park.
• Execution results from supply chain optimization, supplier negotiations, and cost-control measures.