Deutsche Bank warns that POP MART is facing an "Availability Paradox." With production capacity aggressively expanding to 50 million units per month by year-end, Labubu is rapidly transitioning from a scarce trendy IP to a mass-market consumer product. The disappearance of scarcity premiums will directly impact its fashion appeal and secondary market prices.
According to market sources, Deutsche Bank noted in its December 1 report that the market has grown accustomed to projecting future growth linearly based on 2025’s explosive performance. However, the current strong growth driven by Labubu masks significant risks of a supply-demand reversal for POP MART.
If Labubu’s popularity peaks in 2026 without a new hit product to take its place (bear case scenario), POP MART’s valuation pressure will surge sharply. Based on 2025 earnings expectations (P/E of 18x/20x), Deutsche Bank analysts assigned a "Hold" rating to POP MART with a target price of HKD 228.
**Production Surge and the End of Scarcity: From 10 Million to 50 Million** Deutsche Bank argues that POP MART is engaging in a risky gamble—trading scarcity for short-term revenue growth. To meet surging demand, POP MART’s monthly production capacity has skyrocketed from an average of 10 million units in the first half of the year to 50 million by year-end.
While this move is expected to generate an adjusted net profit of approximately RMB 14.5 billion in 2025, it not only resolves supply bottlenecks but also creates an "Availability Paradox." What was once hard to obtain is now ubiquitous, transforming Labubu from a supply-constrained "fashion item" into a "mass-market commodity."
Deutsche Bank warns that for trendy toys reliant on "coolness" and "scarcity," such widespread availability often signals the beginning of declining popularity.
**Secondary Market Prices Sound the Alarm** As the most sensitive barometer of an IP’s appeal, secondary market prices have already issued warnings. Since August 2025, premiums for Labubu and other popular IPs have collapsed amid the supply surge:
- **Premiums Halved**: The premium for Labubu’s "hidden edition" has shrunk by over 50%. - **Below Retail Prices**: Regular editions of Labubu 3.0 and 4.0 are now listed on platforms like "Xianyu" below official retail prices. - **Specific Cases**: The Labubu 1.0 "Exciting Macaron" hidden edition has dropped 50% from its peak; Labubu 3.0 "Love" edition has fallen 81%; and the Crypto Wild but Cutie hidden edition has even plunged 100%.
When scalpers can no longer profit and collectors realize they can buy at retail prices online, panic-driven hoarding demand will vanish, ultimately hurting primary market sales.
**Overseas Markets: From "Queueing Frenzy" to "Shelf Glut"** The hype in overseas markets is also under pressure. In mid-2025, consumers queued for hours or waited months to purchase Labubu, with scarcity driving per-store productivity to luxury-brand levels.
However, recent channel checks reveal a stark reversal. In key markets like the U.S., U.K., and Australia, previously hard-to-find Labubu and Crybaby products are now marked as "In Stock" on both POP MART’s official site and Amazon.
Meanwhile, Google search interest for Labubu has steadily declined since mid-2025, signaling waning attention from new users. With supply outpacing demand, per-store productivity is set to decline inevitably.
**Weak Reception for New Releases** Investors are further concerned by the lukewarm response to recent launches: - **Slower Sales**: The "The Monsters 1 a.m." series (retail price: RMB 79), released on November 7, failed to sell out instantly as before. - **Immediate Discounts**: New products quickly appeared on secondary markets below retail prices. - **Mixed Reviews**: Negative feedback on design and quality has increased on social media.
This suggests consumers may be experiencing "trend fatigue" with Labubu, and increasing supply can no longer mask declining product appeal.
**Valuation Scenarios: 13x or 23x?** Deutsche Bank maintains a "Hold" rating on POP MART with a target price of HKD 228. Given uncertainty around Labubu’s trajectory, it outlines two starkly different valuation scenarios:
- **Bear Case**: Assuming Labubu’s popularity peaks and declines in 2026 with no new IP to replace it, China revenue could drop 20% YoY and overseas revenue 10%. Net profit would fall to RMB 10.6 billion, pushing the P/E to 23x—posing severe valuation pressure. - **Bull Case**: If growth continues and a new IP emerges, China revenue could rise 30% and overseas revenue 50%. Net profit would exceed RMB 23.1 billion, lowering the P/E to 13x and prompting a stock re-rating.
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