Two major investment banks have recalibrated their outlook on Pop Mart International Group following the company's extraordinary 2025 performance, with both HSBC and UBS anticipating a significant normalization in growth as the Labubu phenomenon matures. The divergent approaches—HSBC cutting its price target while UBS maintaining its Buy rating—underscore the complex investment case surrounding the Chinese designer toy retailer as it transitions from hypergrowth to a more sustainable trajectory.

The Labubu Moment: Dissecting 2025's Explosive Growth

Pop Mart's 2026 annual conference in Beijing on February 6 celebrated a remarkable 2025, marked by threefold year-on-year revenue growth driven primarily by the global explosion of its Labubu IP. HSBC estimates that even excluding The Monsters franchise (which includes Labubu), the company's 2025 revenue still doubled year-over-year, while growth excluding plush toys reached approximately 50%. The Monsters' contribution to total revenue surged to 47% in 2025 from 23% in 2024, with plush toys accounting for 60% of revenue, up from 22%.

The company announced that total sales across all IPs and product categories exceeded 400 million units globally in 2025, with The Monsters franchise alone surpassing 100 million units. This milestone, revealed during the annual party, provides crucial evidence of Pop Mart's diversified IP portfolio beyond its breakout character.

HSBC's analysis reveals that ARPU (average revenue per user) expansion among repeat members—customers purchasing more than twice annually—contributed nearly half of mainland China revenue growth in 2025. This reflected what the bank characterizes as a "rush-to-buy" dynamic amid tight supply during Labubu's global breakout phase. As supply scales and product availability improves, this urgency is expected to fade.

2026 Growth Rebasing: Banks Lower Forecasts

HSBC has reduced its 2026 revenue growth forecast from 30.6% to 23.7%, with net profit growth expectations cut from 29.1% to 21.3%. The bank lowered its 2025/26 net profit estimates by 5.7%/11.4% respectively, though its current 2025 forecast remains 3.1% above consensus. Critically, HSBC reduced its 2026/27 earnings estimates by 11-13%, citing the normalization of repeat-member ARPU as the primary driver.

UBS, while maintaining its Buy rating, acknowledged the transition from "Labubu-driven acceleration to a more normalised, retail- and product-led trajectory." The bank expects overall demand from the China market to remain resilient in Q1 2026 versus Q4 2025, as the high base effect on Labubu should be partially offset by contributions from emerging IPs like Twinkle and festival products.

Valuation Compression Reflects Lifecycle Concerns

HSBC lowered its target price to HKD 354.00 from HKD 392.50 (a 9.8% reduction), implying 2026e/27e P/E multiples of 26.2x/21.5x and 38% upside from current levels. The bank noted that since 2025, Pop Mart's one-year forward EPS increased 394% while its forward P/E based on consensus declined 45% from the 2025 average of 29.2x—or 65% from the peak level of 45.4x. HSBC believes this P/E compression "might have reflected concerns around the Labubu IP lifecycle risk," though the bank remains confident in Pop Mart's proven ability to incubate and globalize new IPs.

UBS maintained its price target of HKD 326.00, representing 26.7% upside, emphasizing that the company's IP incubation system is maturing. The bank highlighted early success for Twinkle, with the "Crush on you" Valentine's Day plush version selling 30,000+/46,000+ units on Tmall/Douyin on January 22, compared to 20,000+ units for the Chinese New Year "Have a good run" plush on its Tmall launch day.

Overseas Expansion: Opportunities and Challenges

Both banks identified overseas markets as critical growth drivers, though with different emphases. HSBC's forecast anticipates 2026 overseas revenue growth of 35.7% (revised down from 49.3%), while mainland China growth is expected at 13.0%. UBS noted that the newly launched Skull Panda x My Little Pony collection sold out on the North American official website last week, following record-high Instagram engagement (460,000+ likes versus 180,000+ for Labubu 3.0).

However, UBS cautioned that Pop Mart "needs to increase efforts in consumer engagement, local IP and brand building in overseas markets especially the US." The bank characterized 2024-25 as "the foundational period for the company's global expansion, where the integration of localization and the improvement of operational efficiency are both essential tasks."

The Platform Thesis Endures

Despite near-term growth moderation, both banks maintained Buy ratings, underscoring confidence in Pop Mart's platform capabilities beyond any single IP. HSBC's DCF-based valuation employs a 10.0% WACC and 3.0% terminal growth rate, while UBS's methodology reflects similar long-term assumptions. The banks' divergence on near-term earnings trajectories—HSBC's forecasts are 6.3%/7.8% below consensus for 2026/27, while UBS appears more aligned—suggests the investment debate will center on execution velocity in IP rotation and international expansion.

As Pop Mart navigates this transition from Labubu-driven hypergrowth to a more balanced, multi-IP platform model, investors face a classic dilemma: whether the current valuation adequately reflects both the near-term normalization risks and the long-term franchise value of a company that has demonstrated exceptional IP commercialization capabilities in a notoriously fickle consumer category.