Is Bubble Mart with a 15x P/E ratio a pie or a trap?

Today, Pop Mart released its 2025 financial report: revenue of 37.12 billion yuan, up 184.7% year-over-year; adjusted net profit of 13.08 billion yuan, up 284.5% year-over-year.

But despite the significant performance surge, the market’s reaction was completely opposite—share prices fell sharply.

Undoubtedly, as a consumer goods company with almost no comparable cases in the past, Pop Mart has once again reached a critical divergence point:

On one side is a highly attractive business. A stable net profit margin above 30%, combined with management’s guidance of no less than 20% growth in 2026; on the other side are the valuation corrections and the pessimistic outlook. The P/E ratio has compressed to around 15 times, and market skepticism is clearly increasing.

The core issue behind this is whether we should interpret Pop Mart using a “growth stock” framework or a “cyclical stock” framework.

Today, using this financial report as a springboard, we will discuss our views on this question.

/ 01 /

The growth rate changes of Pop Mart need to be viewed objectively

At first glance, the recent decline can be easily attributed to “performance below expectations.”

But a more accurate way to say it is, it’s not poor performance, but a shift in the “growth narrative.”

Let’s look at the performance: in 2025, the company’s revenue was 37.12 billion yuan, up 184.7% year-over-year; net profit was 12.78 billion yuan, up 308.8%.

This is an impressive financial report by any measure. But the problem is, the market doesn’t trade on “absolute good or bad,” but on “relative expectations.”

The real shock comes from the downward adjustment of growth anchors.

At the earnings conference, management explicitly set the 2026 growth target at “not less than 20%.” However, the market’s previous implicit expectation was actually 50% or even higher.

The gap between these expectations results in a compression of growth imagination.

Especially for a company long priced as a high-growth target, reducing growth from 100%-200% to 20%-30% means shifting valuation logic from “premium for high growth” to “valuation based on steady-state growth.”

This is the core of valuation correction.

But what many overlook is that this slowdown in performance is actually a “certainty event.”

Long-term followers of Pop Mart know that since the mid-year report of 2025, Wang Ning repeatedly emphasized “healthiness.” Essentially, this is signaling a shift: from “extreme growth” to “sustainable growth.”

The underlying constraints are also quite realistic—growing performance scale versus a relatively lagging organizational system. This contradiction has been quite evident over the past year.

In fact, during the recent annual meeting, management pointed out issues in supply chain, organizational culture, and other areas.

Take the supply chain, for example: how to ensure its health during capacity expansion? Yuan Junjie clearly stated at the mid-term briefing that the core of supply chain capacity matching lies in sales forecasts, but how can sales forecasts be reliably fuzzy?

Organizationally, with global expansion, a large influx of new employees has occurred. In 2025, 39% of global staff were new hires, over 60% in Asia-Pacific. At this expansion rate, the organization itself is entering a “rebalancing phase,” where culture, coordination, and execution will face friction.

Especially in Western markets, many consumers are not deeply familiar with the brand. Maintaining brand consistency while insisting on localization is essentially a variable that needs time to validate.

These issues share a common point: they are all caused by rapid business growth and require time to digest. To some extent, slowing growth may actually be beneficial for Pop Mart’s long-term development.

Wang Ning also mentioned this at today’s earnings release. The company will not pursue overly aggressive growth that sacrifices profit for revenue in the near term. Instead, a more long-term, stable, and healthy growth is the core goal of Pop Mart’s management.

Another piece of evidence is that the slowdown in performance was anticipated by foreign investors’ forecasts. After the third quarter report, Morgan Stanley predicted 26% growth in 2026 and 20% in 2027. These projections are almost aligned with the company’s current guidance.

In essence, this financial report “confirms rational expectations” but breaks the “optimistic expectations.”

And the sharp market volatility stems precisely from here. After a significant rise over the past year, the market’s holdings structure has tilted toward “high expectations funds.”

When a stock’s fundamentals are good but not exceeding expectations, and management provides more conservative guidance, it’s natural for funds to realize gains.

Overall, although Pop Mart’s growth rate is slowing, the main reason for this sharp decline is more about sentiment and capital game rather than a fundamental deterioration.

So, how should we now view Pop Mart’s value?

/ 02 /

From the core divergence, understanding Pop Mart’s value

Returning to the current state of Pop Mart, the core divergence is quite simple:

Is it a consumer company, or a cyclical stock?

Generally, consumer stocks are valued based on their earnings growth. Cyclical stocks, due to their large earnings volatility, are often assigned lower valuations at cyclical peaks.

A cyclical industry is one where profits fluctuate significantly with economic or industry supply-demand cycles—perhaps earning 10 billion this year, losing 5 billion next year, then earning 20 billion the following year. Industries like pork, which are cyclical, often use PB (price-to-book) ratios for valuation, such as Muyuan’s PB ratio of 2.98 and P/E ratio of 11.59.

If we interpret Pop Mart as a consumer company, its current 15-16x P/E, with over 20% growth and about 2% dividend yield, isn’t expensive; but if the market prices it as a cyclical stock, then a valuation center around 10x makes more sense.

In my view, Pop Mart still leans more toward the former. From the current perspective, its growth path over the next two years remains relatively clear, which can be viewed in three layers:

First, overseas expansion remains rapid. Overseas revenue is projected to grow from 5 billion in 2024 to 18 billion, nearly 50% of total revenue. More importantly, despite fewer stores (185 vs. 445 domestically), per-store output is higher, indicating overseas expansion is still in an “efficiency-first” stage, far from maturity.

Second, the business model is evolving from simply selling trendy toys to becoming an “IP platform,” building a complete ecosystem around IP—parks, content, and derivatives.

At the earnings conference, the company explicitly accelerated this path: new businesses like accessories, parks, content, and catering are advancing simultaneously. Essentially, they are doing one thing—extending IP lifecycle and deepening monetization of each IP.

Historically, this path has been validated. The high user stickiness to IP has smoothly transferred to other IP-related sectors. For example, according to Ctrip’s Beijing popular attractions list (including free sites), Pop Mart’s city parks are the second most popular destination after Tiananmen and the Great Wall.

Third, the company has demonstrated that strong IPs are not entirely uncopyable.

Stars like Starry People quickly grew from 120 million to 2 billion, showing that blockbuster hits are not completely uncopyable. At least at the “medium-success IP” level, the methodology has been established.

As of now, aside from Labubu in the “The Monsters” family, the company has six IPs earning over 2 billion yuan, and 17 IPs over 100 million yuan.

Long-term, as more medium-sized IPs like Starry People emerge, and with new operational methods like cross-selling, Labubu’s revenue share is likely to decline below 30%.

This points to a more important change: the growth logic.

Previously, Pop Mart’s growth was driven by Labubu 3.0. In the short term, it’s difficult to replicate another explosion of the same level.

As Labubu’s contribution declines, the company’s growth logic is shifting from “single blockbuster-driven” to “IP portfolio + operational-driven.”

Of course, this transition won’t be immediate; it requires 1-2 years of validation, which is the current divergence source.

In the short term, Labubu 3.0’s cycle is still ongoing and stabilizing; but in the long run, does the company have “cross-cycle resilience”?

The current market valuation essentially pre-emptively prices in a risk: that IP hype may not be sustainable.

But the question is, has this risk been validated?

From the current fundamentals, there’s no sign of a substantial decline in performance. The so-called “slowing” is more a natural correction from a high base—something all retail companies experience.

So, this is a typical investment scenario:

Fundamentals are still growing, but the market is starting to price in a more pessimistic framework.

At this point, the key becomes “odds.” If you interpret it as a cyclical stock, 10x P/E is the lower bound; but if the company maintains 20% growth, then a 15x P/E ratio is supported by earnings.

In other words, the downside depends on “IP losing its appeal,” while the upside depends on “growth continuing to materialize + structural recognition by the market.”

Currently, the former has not been confirmed, while the latter is still unfolding.

Beyond business fundamentals, two practical constraints also influence the company’s valuation:

First, the company has ample cash flow and buyback capacity, providing some valuation support.

Second, the current share price is below the previous buyback range, indicating management’s valuation judgment has already become somewhat explicit.

From an investor’s perspective, Pop Mart is currently in a “risk priced in early, but not yet validated” position.

At least at this point, continuing to be bearish may not be a particularly high-probability trade.