(HUACHUANG Securities): Maintains a "Buy" rating on POP MART (09992) with a target price of 56.2 Hong Kong dollars.

released a research report stating that they maintain a "recommended" rating for POP MART (09992), with an estimated net profit attributable to shareholders of 21.52/28.58/35.37 billion yuan in 2024-2026, and a target price of 56.2 Hong Kong dollars. The company's IP empowerment business is expanding its boundaries, with high-quality growth in overseas markets. The ChaoWan products in the domestic market continue to maintain high popularity, and the company is expected to see growth in categories like building blocks, as well as the impact of theme parks and game business on core IP. In the overseas market, the company leverages local innovation and DTC operations to get closer to the market, and expects performance growth from overseas store expansion and improved store efficiency. Details: The company released its 2024 interim report. In the first half of the year, the company achieved revenue of 45.6 billion yuan, a year-on-year increase of 62.0%; and a net profit of 9.6 billion yuan, a year-on-year increase of 102.0%, both exceeding previous performance forecasts. Main points of Huachuang Securities are as follows: Domestic Market: Steady growth across all channels, improving store efficiency in retail channels. In the first half of the year, the company achieved revenue of 32.1 billion yuan in the domestic market, a year-on-year increase of 31.5%; with offline/online/wholesale and other channels achieving revenue of 17.9/11.0/3.2 billion yuan, a year-on-year increase of 23.1%/34.0%/90.8% respectively. In terms of channels, 1) Offline channels: In the first half of the year, the company's retail store/Siasun Robot&Automation store revenue increased by 24.7%/16.2% respectively year-on-year, with a net increase of 11 stores/1 store from the end of 2023. In terms of store efficiency, both per store and same-store sales in retail stores saw double-digit growth in the first half of the year. 2) Online channels: The revenue from Tmall/Douyin/Lucky Box channels increased by 28%/91%/7% year-on-year respectively, with strong growth in new channel revenue. 3) Wholesale and other channels: The theme park business provides consumers with immersive IP experiences, and plans to launch dessert shop businesses in the future. Hong Kong, Macau, Taiwan, and Overseas Markets: Rapid channel expansion, expected to open 30-40 new stores in the second half of the year. In the first half of the year, the company achieved revenue of 13.5 billion yuan in the Hong Kong, Macau, Taiwan, and overseas markets, a year-on-year increase of 259.6%, and revenue accounted for 29.7% of the total, surpassing the full-year revenue for 2023. In terms of regions, Southeast Asia was the company's main focus, with revenue increasing by 478% year-on-year; impressive growth in the European and American markets, with revenue in North America/Europe, Australia, and other markets increasing by 378%/159%; and revenue from East Asian markets and the Hong Kong, Macau, Taiwan region increasing by 154% year-on-year. In terms of channels, 1) Offline channels: Revenue increased by 397% year-on-year in the first half of the year, with retail stores/Siasun Robot&Automation stores seeing revenue increases of 442%/110% respectively. In terms of store efficiency, retail stores/Siasun Robot&Automation stores increased by 134%/34% year-on-year respectively. The LABUBU theme store in Bangkok, Thailand opened this year with daily sales exceeding 10 million yuan, making the company a phenomenal brand in the Southeast Asian market. 2) Online channels: Revenue increased by 335% year-on-year in the first half of the year, with revenue from the company's official website/Lazada/Shopee increasing by 465.5%/387.9%/205.2% year-on-year. 3) Wholesale and other channels: Revenue increased by 22.5% year-on-year in the first half of the year. Looking ahead to the second half of the year, the company plans to continue opening 30-40 new overseas stores. Profitability improvement, optimization of expense ratio. In the first half of 2024, the company achieved a gross profit margin of 64.0%, an increase of 3.6 percentage points year-on-year, mainly due to continued optimization of the supply chain and a decrease in the proportion of outsourced products, as well as an increase in the proportion of high-margin overseas product sales. On the expense side, the company achieved a sales/management expense ratio of 29.7%/9.5%, a year-on-year decrease of 1.5/2.2 percentage points, mainly due to an increase in the number of employees. Overall, the company achieved a net profit margin of 20.2%, an increase of 3.3 percentage points year-on-year. Risks: Fluctuations in raw material prices, channel expansion below expectations, and slower than expected growth in new customer development.