Pop Mart's Labubu Faces IP Cycle Challenges, Market Crowding

Labubu, a popular new IP, has been compared to the traditional liquor giant, Maotai, by analysts. Both are considered social currencies, but they cater to different generations and have distinct social functions. Maotai is often used as a "social/ business lubricant" in professional settings, while Labubu represents the emotional value sought by the younger generation in the digital age. This difference highlights the shift from traditional to new consumption patterns.

Analysts have pointed out that, similar to Maotai, Pop Mart, the company behind Labubu, faces challenges related to IP cycles and investment attributes. The success of Labubu is crucial for Pop Mart's global growth, and any delay in introducing the next hit IP could slow down the company's expansion. Additionally, the mainstreaming of subcultures could dilute Labubu's unique social identity, potentially alienating its core consumer base.

The investment attribute of Maotai has been a double-edged sword, acting as a catalyst during bull markets but an amplifier during bear markets. Pop Mart is actively managing the secondary market prices to maintain its appeal to young consumers and create a favorable environment for new IP and product launches. The recent drop in the secondary market prices of Labubu's plush toy series is seen as a result of Pop Mart's proactive management of supply and demand dynamics.

Regulatory risks and market crowding are two other significant factors that investors must consider. Maotai has long been subject to price controls and anti-corruption campaigns, and Pop Mart is not exempt from regulatory scrutiny. However, the diversification of Pop Mart's consumer base and its growing overseas business are expected to mitigate some of these risks. The report also notes that market cycles often see dominant "crowded trades," and the current focus on new consumption stocks is reminiscent of the previous bull market in blue-chip consumer stocks led by Maotai. Changes in fund flows and positions can have a significant impact on valuations, and while recent shifts have put pressure on new consumption stocks, the report suggests that this crowdedness may persist until there are meaningful turning points in overseas market data or a strong recovery in the Chinese economy.