Key Takeaways
Pop Mart (09992.HK) saw its stock fall after China Merchants Securities International (CMSI) forecast the toymaker's second-half sales growth would decelerate to nearly zero, reiterating a Sell rating.
"Growth in 2Q will plummet to low double-digit percentages, while 2H26 was expected to turn flat or negative under a high base effect," CMSI said in its report, cutting its price target on the stock to HKD 127.
The bearish outlook follows strong first-quarter sales, which surged 75-80% year-over-year. However, CMSI projects this momentum will fade rapidly. The broker's full-year 2026 sales forecast of RMB 41 billion implies just 1.6% growth, starkly contrasting with management's own 20% guidance. The report noted that buy-side investors are already pricing in a weaker scenario, with broad expectations for full-year growth between 0-15%.
The downgrade highlights significant execution risks in Pop Mart's overseas expansion. CMSI noted weaker-than-expected sales in the Asia-Pacific region and "new headwinds" for its e-commerce business in the United States.
CMSI has lowered its revenue forecasts for Pop Mart for 2026-2028 by an average of 10% and slashed its net profit forecasts for the same period by 11.6%, 10.7%, and 9.5%, respectively. The broker also reduced its gross and operating margin forecasts for 2026.
The firm's skepticism extends to Pop Mart's physical store rollout, forecasting the total number of overseas stores in 2026 will be below 250, missing market expectations of 250-280 stores. This is despite the company's plans to add more than 40 new stores in the US to bolster its offline performance.
The reiterated Sell rating and lowered forecasts from a key broker could increase selling pressure on Pop Mart's shares. Investors will be closely watching the company's second-quarter results for any confirmation of the widely expected slowdown.
This article is for informational purposes only and does not constitute investment advice.
