The Zhitong Finance App learned that Citibank released a research report saying that in the industry, the bank favors companies that have strong in-house IP operation capabilities and can create sustainable value. The preferences are Bubble Mart (buy) > Bruco (buy) > Mingchuang Premium (neutral). The target prices are HK$198, HK$82 and HK$22.2, respectively.
According to the report, under the high base in the third quarter, investors focused on whether Bubble Mart (09992) could record quarter-on-quarter improvements after the base was reset, while the fourth quarter could record quarter-on-quarter improvements due to the effectiveness of seasonal and organizational capacity measures. Bruco (00325)'s new product launch accelerated in the third quarter. The bank expects it to move towards its 2026 growth target, and overseas expansion, new categories and IP diversification measures are beginning to bear fruit. In terms of Mingchuang Premium (09896), although China's GMV growth beat expectations in the third quarter, there is still uncertainty in the final quarter due to the slowdown overseas, and the profit model of the overseas and TOP TOY business will take time to straighten out.
In terms of Bubble Mart, the company opened a number of flagship stores during the period, including Hangzhou, Chengdu, Changsha and Paris, to support its focus on offline experiences, and it is expected that offline channels will be relatively resilient. Non-LABUBU IPs such as TWINKLE TWINKLE and ZSIGA have climbed to demonstrate their multi-IP incubation and operation capabilities. With recent challenges largely reflected in prices, market disputes mainly focused on the recovery trajectory after the base was reset. The bank expects recovery to occur in 2027, and emerging IPs will pave the way for growth.
In terms of Mingchuang Premium, the bank expected revenue for the third quarter to increase 11% year-on-year, but adjusted net profit fell 10% year-on-year. Mainland China's GMV accelerated to a year-on-year increase of 25% to 30%, same-store sales growth was high in single digits, while overseas expectations slowed to a low single-digit year-on-year increase. The large-scale store format and proprietary IP strategy are beginning to bear fruit, but in the short term, they may drag down profitability. Mingchuang Premium's GMV improved in September to a year-on-year increase of more than 30%. In the third quarter, the year-on-year increase was about 20%, and same-store sales were positive, driven by new products. However, there is still uncertainty about the fourth quarter. This season is the traditional peak season overseas, accounting for about 31% of the year, and the Chinese market is also facing high base pressure.