Deutsche Bank has raised a warning that Pop Mart International Group Limited's era of high growth may have reached an inflection point.

According to the bank's latest research report, the firm maintains a "sell" rating on Pop Mart, setting a target price of HK$140, which implies a potential downside of approximately 10% from the current share price of HK$154.90.

Analysts at the bank noted in the report that Pop Mart's revenue growth for the second quarter of 2026 is projected to decelerate sharply to only about 1.6% year-over-year, down from 75%-80% growth in the first quarter. They anticipate that with its intellectual property cycle reaching a peak, the company will face more severe year-over-year decline pressures in the second half of the year.

Deutsche Bank's forecasts show that Pop Mart's full-year 2026 revenue may drop by 6% to around 35 billion yuan, with adjusted net profit declining by 13% to roughly 11 billion yuan, which is about 20% below the Bloomberg consensus estimate. The report argues that the current stock price does not yet fully reflect the risks associated with slowing revenue growth and weakening operating leverage.

Weak Reception for Labubu 4.0 Signals Deteriorating IP Momentum

The Deutsche Bank report identifies the lackluster performance of the flagship Labubu IP's latest series as a key factor in the growth slowdown.

Based on channel checks using secondary market transaction data, social media feedback, and offline inventory levels, the market response to Pop Mart's recently launched THE MONSTERS Hair Salon series (Labubu 4.0) has been disappointing. Despite high pre-launch expectations built through FIFA World Cup exposure and endorsements by Lisa, the actual sales boost has been far weaker than anticipated.

The report points out that just one week after its launch, the secondary market price for some standard edition Labubu 4.0 products had fallen to around 50 yuan, significantly below the retail price of 159 yuan. Deutsche Bank views this discount as more pronounced compared to other IP series, especially given that market expectations for Labubu 4.0 were previously elevated. The weak pricing in the secondary market is seen as a signal that enthusiasm from collectors and resellers is waning, indicating a diminishing appeal for the IP.

Inventory Clearance Promotions Spread, Revealing Discount Pressure Across Markets

The Deutsche Bank report also observes a stark contrast to the supply shortages and instant sell-outs of new products in the second half of 2025. It notes signs of inventory clearance promotions emerging in multiple markets, which is viewed as a potential risk to profit margins.

In the China market, Pop Mart recently offered tiered discounts on its Tmall/Taobao official flagship store during the 618 shopping festival and launched "lucky bags" containing various products. The bank highlighted that the Labubu World Cup series was included in every four lucky bags, suggesting that the actual sales conversion for this series was weaker than previously expected.

In overseas markets, similar promotional activities have reportedly spread to Asian markets like Indonesia, Singapore, and Thailand, where IP products are bundled in lucky bags with significant discounts to clear inventory. In European and American markets, third-party retailers selling Pop Mart products commonly offer direct discounts of around 20%, with official stores also running promotions during major shopping holidays. Deutsche Bank believes these signs indicate that promotional pressure has become widespread.

Second-Quarter Growth Slows, H2 Outlook Falls Below Market Consensus

The bank projects Pop Mart's first-half 2026 revenue at 18.2 billion yuan, representing 32% year-over-year growth, with adjusted net profit at 6 billion yuan, up 27%. Within this, second-quarter revenue is estimated at approximately 8.3 billion yuan, showing a mere 1.6% year-over-year increase and a 16.3% sequential decline.

By region, Deutsche Bank expects China sales to grow about 15% year-over-year in Q2. However, following the disappointing launch and weakening sales momentum of Labubu 4.0 in June, subsequent growth may flatten or turn negative. Overseas sales are forecast to decline by about 19% year-over-year, a stark contrast to the roughly 40% growth seen in Q1, and are expected to fall about 20% sequentially.

Looking ahead to the second half, the report provides preliminary estimates, suggesting a potential year-over-year revenue decline of 35% for the group in the third quarter and an 18% decline in the fourth quarter. Overseas sales are projected to fall by 50% and 34% year-over-year in Q3 and Q4, respectively. China sales are estimated to decline by 22% in Q3, with the potential decline narrowing to around 5% in Q4, possibly supported by year-end e-commerce shopping festivals. Deutsche Bank's full-year adjusted net profit forecast of about 11 billion yuan is roughly 20% below the Bloomberg consensus estimate of 14.3 billion yuan.