Market sentiment received a boost as prominent investor Duan Yongping publicly increased his stake, driving Pop Mart's stock price up nearly 6% at one point on Friday. However, Deutsche Bank released a report the previous day maintaining a Sell rating on the trendy toy giant. The bank lowered its target price from HK$157 to HK$140, suggesting a potential downside of approximately 14% from the current market price.
Duan Yongping posted on the social investment platform "Snowball" that he had swapped his entire position in coal stock China Shenhua for Pop Mart shares. He quipped, "Shenhua is an excellent company, and our investment yielded strong returns. Thanks for that, and we may return in the future." This statement quickly spurred market followers, with inflows from southbound capital and retail investors becoming the primary catalyst for the recent stock rebound.
In contrast, Deutsche Bank analyst Sammi Xu issued a clear warning on Pop Mart's fundamentals in a Q1 performance preview report dated May 7th. The report highlighted a continued sequential weakening in overseas markets and signs of fatigue in domestic IP popularity. If current trends persist, full-year 2026 revenue could potentially turn negative year-over-year.
Deutsche Bank's forecasts diverge significantly from mainstream market expectations. The bank projects Pop Mart's adjusted net profit for 2026 to be RMB 11.5 billion, a 12% year-over-year decline, which is approximately 24% below the consensus estimate of RMB 15.2 billion. Concurrently, Deutsche Bank cut its full-year revenue forecast by 14% to around RMB 36.5 billion and reduced its net profit forecasts for 2026 to 2028 by 16% to 28%.
Duan Yongping's increased stake buoyed sentiment, leading to a short-term stock rebound. The core driver behind Pop Mart's recent share price strength stems from the continued statements and actions of the well-known investor Duan Yongping. According to Deutsche Bank's report, Duan manages over $17 billion in US assets through H&H International Investment and is known for a deep-value, long-term investment style. His bullish commentary on the "Snowball" platform holds significant sway over retail and southbound investors.
The Deutsche Bank report indicates that in April, Duan sold a substantial volume of Pop Mart put options with strike prices between HK$145 and HK$150. If fully exercised, these would represent a stake equivalent to about 3% of Pop Mart's total share capital. After these April options expired, he continued selling put options with a HK$155 strike price. On May 7th, he further announced selling other Hong Kong stock holdings to directly purchase Pop Mart ordinary shares. These actions persistently increased southbound capital inflows and retail investor attention, becoming the primary source of recent momentum for the stock price.
Q1 Preview: Significant Sequential Drop Overseas, Domestic Market Relies on Low Base. Pop Mart is expected to release its Q1 operational data in mid-May and will hold its first-ever quarterly management conference call. Deutsche Bank estimates Q1 total revenue at approximately RMB 8.9 billion, representing 73% year-over-year growth. However, this impressive figure largely relies on a low base effect from the same period last year.
By region, the domestic market is estimated to have grown 85% year-over-year in Q1, primarily driven by holiday season sales and the low base. Online sales grew 86% year-over-year, while offline same-store sales growth (SSSG) reached 42%. However, Deutsche Bank expresses clear caution regarding the sequential trend in overseas markets: the bank expects overseas sales to decline 27% sequentially, with Europe showing the largest drop at 41%, North America down 36%, and Asia relatively resilient with an approximate 18% decline. Although overseas markets still show about 60% year-over-year growth, this is mainly due to an extremely low base in Q1 2025 and may not reflect genuine demand momentum.
Deutsche Bank also notes divergent market interpretations of the upcoming management call. Some investors view it as a positive signal of enhanced corporate transparency, while others see the delayed release of operational data and the inaugural conference call arrangement as potential warning signs of downside risks.
IP Fatigue Spreads, Signs of Structural Slowdown Emerge Domestically. A deeper concern lies in the waning popularity of Pop Mart's core IPs in the domestic market. The report points out that secondary market prices for recently launched series like "The Monsters" (Labubu) and "Twinkle Twinkle" have noticeably declined. For instance, the Monster x Sanrio collaboration is trading on the secondary market at a discount of up to 40% to its launch price. The latest "Twinkle Twinkle" series is also trading at a discount, failing to replicate the premium effect seen with previous Labubu series and dashing market expectations for a "Labubu-like" performance.
Extrapolating domestic e-commerce monthly trends from March 2026 through year-end, Deutsche Bank's calculations suggest domestic e-commerce sales could decline 17% year-over-year in the second half of 2026. The bank therefore judges that structural slowing in Pop Mart's domestic market may have begun to manifest in Q1.
Regarding quarterly sequential forecasts, the domestic market is expected to see quarterly changes of -19%, -2%, +14%, and -9% in 2026, respectively, while overseas markets are forecast at -27%, -4%, +12%, and -5%. This results in full-year consolidated revenue declining approximately 2% year-over-year. The brief rebound anticipated in Q3 primarily hinges on the launch of "Labubu 4.0" and sales related to the World Cup.
Earnings Forecasts Significantly Below Consensus, Operating Leverage Faces Reversal. Deutsche Bank's 2026 profit forecasts for Pop Mart show a significant gap compared to mainstream market expectations. The bank projects full-year revenue of RMB 36.5 billion, about 20% below the consensus estimate of RMB 45.5 billion. Adjusted net profit is forecast at RMB 11.6 billion, roughly 24% below the consensus of RMB 15.2 billion. The EPS forecast of RMB 8.51 is 25% lower than the consensus estimate.
Beyond top-line pressure, a reversal in operating leverage is expected to further erode profit margins. Pop Mart's EBIT margin reached a high of 45% in 2025, significantly exceeding the sub-20% levels common among retail peers. However, with declining same-store sales growth and the high fixed costs associated with opening flagship stores in prime European and American locations, margin compression pressure is a notable concern. Additionally, a significant inventory build-up at the end of 2025 raises Deutsche Bank's alertness to potential overstock and clearance risks, which could further damage brand value and financial stability.
Deutsche Bank cut its net profit forecasts for 2026-2028 by 16% to 28% and reduced its DCF-derived target price from HK$157 to HK$140. This implies a 2026 forward P/E of 14x. The bank maintains its Sell rating, noting that the current stock price of HK$162.2 implies a 2026 forward P/E of about 16.4x, leaving room for valuation downside.
Investors Focus on Four Key Areas, Labubu 4.0 a Critical Variable. The report outlines four key issues investors are most focused on ahead of the upcoming management conference call.
First, the sequential sales trends in different overseas regions. As Pop Mart typically discloses only year-over-year growth rates rather than absolute sales figures, the market lacks official sequential data, and investors are eager to understand the true momentum in each region.
Second, the latest sales figures for April and May. Given the call is scheduled for mid-May, the market seeks an update on recent sales trends following the end of Q1.
Third, the full-year operating margin guidance. Management mentioned during the FY 2025 earnings call that the operating margin had narrowed by only about 1 percentage point in the first two months of 2026. However, Deutsche Bank believes that the softening domestic monthly sales post-Chinese New Year, coupled with high operating costs for overseas flagship stores, make this margin level difficult to sustain.
Fourth, the progress of the "Labubu 4.0" launch. Pop Mart Chairman Wang Ning recently hinted in an interview that the series would bring "completely new content," but its launch has previously been delayed. The market is closely assessing whether this IP can generate sufficient incremental sales to reverse the trend of declining brand heat.