Citi Sees Pop Mart's LABUBU Resale Dip as Buying Opportunity, Not IP Fade
Citigroup published a bullish take on Pop Mart International Group following an expert call on September 18, 2025, arguing that recent share price weakness tied to declining LABUBU resale values presents a strategic entry point rather than signaling fundamental deterioration. The analysis comes as investors increasingly scrutinize the sustainability of China's pop toy phenomenon and the mechanics driving secondary market valuations.
Expert Insights Paint Optimistic Industry Picture
Citi hosted Haoming Dou, an independent consultant and former business director at Shanghai Biyou Huixiang Intelligent Technology, which operates the Qiandao APP reselling platform. Dou's assessment suggests China's pop toy market remains in early-stage development with substantial long-term upside, driven by consumers seeking "affordable ways of gaining strong emotional satisfaction."
The expert noted that Pop Mart's recent restocking initiatives represent a calculated move to serve genuine demand while curtailing speculative reseller activity. "Through core IPs to build recognition and scarcity is effective way to maintain resale value in secondary market," Dou explained, emphasizing that sustainable IP strength requires balancing supply with authentic consumer engagement.
LABUBU Price Correction: Normalization, Not Decline
Addressing market concerns over LABUBU's secondary market performance, the analysis characterizes the recent resale price decline as normalization rather than weakening brand appeal. Dou highlighted that "previous sharp hike in LABUBU 3.0 resale price was more of a one-off event," with secondary prices typically stabilizing between product launches.
The expert distinguished between genuine consumer activity and speculative behavior, noting that typical scalpers "are featured with frequent purchase on reselling platforms to push up 2nd hand price but rarely resell there." This dynamic suggests that Pop Mart's supply adjustments target artificial price inflation while preserving authentic collector demand.
IP Pipeline Shows Promise Beyond LABUBU
Looking beyond the flagship character, Dou identified CRYBABY and TWINKLE TWINKLE as emerging IP candidates with distinctive positioning. TWINKLE TWINKLE particularly stands out for its "less defined original character, human-like and a well-developed story line," gaining traction through organic user recommendations rather than marketing-driven awareness.
The analysis reinforces Pop Mart's IP-centric business model, with successful characters demonstrating both social functionality and economic value within target demographics—primarily females aged 18-30 drawn to characters with "cute, childlike appearance that evokes the desire to protect."
Valuation and Outlook
Citi maintains its Buy rating with a HK$ 398 target price, representing HK$267.20 (US$34.35). The target reflects 31x 2026E P/E, a 10% premium to the stock's four-year historical average, justified by improving growth trajectory and execution capabilities.
The firm acknowledges Pop Mart trades at a premium to global toy and IP peers but attributes this to "overseas-expansion-led fast growth while its more established rivals record slower growth." Market capitalization stands at HK$358.8billion (US$ 46.1 billion).
Key risks include intensifying competition in China's pop toy market, disappointing global expansion, and potential regulatory tightening. However, Citi's analysis suggests the company's focus on authentic demand rather than speculative resale activity positions it favorably for sustained growth as the kidult trend continues expanding across younger demographics.
The investment thesis ultimately hinges on Pop Mart's ability to cultivate genuine IP strength through balanced supply management and community engagement, rather than relying on artificial scarcity driving short-term resale premiums.