Monthly production of 50 million units! When Labubu is no longer scarce, what will POP MART take over?

Deutsche Bank warns that POP MART is facing the "Availability Paradox." As production capacity aggressively expands to a monthly output of 50 million by the end of the year, Labubu is rapidly transforming from a scarce trendy IP into a mass consumer product, and the disappearance of scarcity premium will directly impact its fashion attributes and secondary market prices. According to news from the Wind Trading Desk, Deutsche Bank stated in a report on December 1 that the market is accustomed to linearly deriving future growth based on explosive growth projected for 2025, but the strong growth driven by Labubu currently masks the significant risks of a supply-demand reversal for POP MART. If Labubu's popularity peaks in 2026 without new hit products to take over (bear market scenario), the valuation pressure on POP MART will sharply increase. Based on the expected price-to-earnings ratio for 2025 (18x/20x), Deutsche Bank analysts have given POP MART a hold rating, with a target price of HKD 228. Capacity Surge and the End of Scarcity: From 10 Million to 50 Million Deutsche Bank believes that POP MART is engaging in a dangerous gamble: exchanging scarcity for short-term revenue scale. To meet the surging demand, POP MART's production capacity has skyrocketed from an average of about 10 million per month in the first half of the year to an average of 50 million per month by the end of the year. This move, while expected to bring about RMB 14.5 billion in adjusted net profit in 2025, not only resolves the supply bottleneck but also creates the "Availability Paradox." What was once hard to find has become ubiquitous, with Labubu transitioning from a "fashion item" with limited supply to a "mass product." Deutsche Bank warns that for trendy toys that rely on "cool" and "scarcity" attributes, such widespread availability is often a precursor to declining popularity. As the most sensitive barometer for measuring IP popularity, secondary market prices have issued a warning. Since August 2025, with the arrival of the supply surge, the premiums for Labubu and other popular IPs have plummeted across the board: Premiums halved: The premium for the popular Labubu "hidden version" has shrunk by over 50%. Spot prices below cost: The regular versions of Labubu 3.0 and 4.0 are listed on "QianDao" or "XianYu" below the official retail price. Specific cases: The price of Labubu 1.0 "Exciting Macaron" hidden version has dropped by 50% from its peak; Labubu 3.0 "Love" version has dropped by 81% from its peak; the hidden version of the Crypto Wild but Cutie series has even dropped by 100%. When scalpers find no profit to be made and collectors discover they can even buy at original prices on e-commerce platforms, the panic-driven hoarding demand will instantly disappear, further impacting sales in the primary market. Overseas Market: From "Queueing to Buy" to "Shelf Overload" The enthusiasm in the overseas market is also facing challenges. By mid-2025, consumers needed to queue for hours or book for months to buy Labubu, a scarcity that once pushed the single-store efficiency in overseas markets to luxury levels. However, the latest channel checks show a fundamental reversal in the situation. In major markets such as the United States, the United Kingdom, and Australia, both the POP MART official website and Amazon now show that previously sought-after products like Labubu and Crybaby are "in stock" (Yes). At the same time, the search popularity of Labubu on Google has been declining since mid-2025. This indicates that new user interest is waning while supply continues to flow, and this gap will inevitably lead to a decline in single-store productivity. What worries investors even more is the market feedback on new product launches. The recently launched "Labubu Mini" and "The Monsters 1 a.m." series have encountered a Waterloo: Sales Slowdown: The "The Monsters 1 a.m." series (original price RMB 79) released on November 7 failed to sell out instantly as before. Immediate Discounts: Almost immediately after the new product launch, discounts appeared in the secondary market, with prices dropping below the issue price. Diverging Reputation: There has been an increase in negative reviews regarding design and quality on social media. This indicates that consumers may have developed "fashion fatigue" towards the Labubu IP, and merely increasing supply can no longer mask the decline in product appeal. Valuation Scenario Analysis: 13 Times or 23 Times? Deutsche Bank maintains a "Hold" rating on POP MART, with a target price of HKD 228. Given the uncertainty in the popularity trend of Labubu, Deutsche Bank has provided two distinctly different valuation scenarios: Bear Case: Assuming Labubu's popularity peaks and declines in 2026, with no new IP to take over. It is expected that revenue in China will decline by 20% year-on-year in 2026, and overseas revenue will decline by 10%. This will lead to a net profit of RMB 10.6 billion in 2026, with an implied price-to-earnings ratio rising to 23 times, resulting in significant valuation pressure. Bull Case: Assuming growth momentum continues and new IPs emerge. Revenue in China will grow by 30%, and overseas growth will be 50%. The net profit in 2026 will exceed RMB 23.1 billion, with an implied price-to-earnings ratio dropping to 13 times, leading to a re-rating of the stock