Labooboo v. Chinese authorities: will tougher regulation stop Pop Mart?

In mid-June, China's state-run media outlet "Renmin Zhibao" called for stricter regulation of blind box sales - so-called "surprise boxes" with toys, when the buyer does not know what is inside, Bloomberg wrote. Current rules prohibit the sale of such boxes c toys to children under 8 years old and require parental consent to purchase for children from 8 to 18 years old.

China should further tighten rules to regulate the sale of "surprise boxes" as some of the existing business models lead to the formation of addiction in minors to buy these products, the newspaper wrote, citing lawyers. The article did not name any company, but investors "counted the signal" - shares of Hong Kong-based Pop Mart fell almost 8.8% in the two trading days after the publication;

This company has become world-famous for selling "surprise boxes" with toys, including the world-famous Labooboo. Only since the beginning of this year, its shares on the stock exchange in Hong Kong have grown by almost 180%;

It has proved resilient to recession and trade war, Bloomberg wrote about it. Will tighter regulation stop its development?

Pop Mart was founded in 2010 by Wang Ning, an advertising graduate of Zhengzhou University. In mid-June, he entered the top 10 richest people in China according to Forbes and became China's youngest billionaire;

Initially, Pop Mart sold not only toys, but also stationery, cosmetics and other small souvenirs. But over time, Wang Ning noticed that it was toys that were in the greatest demand, and in 2014 the company fully focused on the toy segment.

Collaboration with artists and designers allowed the company to launch its own line of collectible figurines in 2016. For example, Hong Kong artist Kenny Wong created the Molly doll for the brand. She is the second most popular Pop Mart toy. 

The real success of the company came from Labooboo. Pop Mart's most popular character, a toothy furry animal, was created by Hong Kong artist Kasin Lun, and was inspired by Scandinavian mythology and the book Where the Wild Things Are by Maurice Sendak. In 2019, Pop Mart partnered with Moon and began producing these toys.     

The company started selling them in "surprise boxes": the element of surprise and the chance to find a rare version stimulated customer interest and repeated repeat purchases. And the secondary market quickly drove up prices for the rarest copies. Social media and celebrities were also driving the popularity. In April 2024, singer Lisa from BLACKPINK showed Labba on her social media accounts. She was followed by Rihanna, Kim Kardashian, Dua Lipa and other global stars. This is how these toys acquired the status of a prestigious star "mascot".

Labooboo dolls are sold out within seconds and are nearly impossible to buy through official channels, told their fan Evelyn Lin to CNN. In late May, the channel reported that Chinese customs authorities seized a total of 462 Pop Mart dolls in two months. "Presenting reporters with the latest shipment of seized goods last month, two Chinese customs officials showed off not drugs or weapons, but suitcases full of plush toys," the piece said. They, according to customs, were intended for resale;

In 2024, Pop Mart's revenue doubled to 13 billion yuan ($1.8 billion). Of that, Labooboo and other characters in the Monsters line accounted for $400 million. Revenues outside China increased by an impressive 375%, to 5.07 billion yuan. And in the US, revenue grew 895-900%, according to Citi. At the end of 2024, the company had more than 530 stores and nearly 2,500 roboshop machines in more than 30 countries. The company also regularly organizes pop-up outlets, for example, in London's Harrods, and cooperates with online marketplaces. 

Several investment banks - Bank of America, JPMorgan and UBS - commented on the pressure on the company in their materials. 

According to Bank of America, Pop Mart's exposure to risks is low: "A recent article in Zhenmin Zhibao has brought renewed attention to regulatory risks. However, we believe that Pop Mart has managed to significantly reduce the share of the younger audience in its sales and expanded its target customer groups. At the same time, more than half of the company's revenue in 2025 will come from overseas markets (vs. 39% in 2024) with less stringent regulation",  - the bank said in its materials. Bank of America on June 23 maintained a "buy" recommendation and a target price of HK$275, up 10.2% from the closing price on July 3. 

The same opinion is held by JPMorgan analysts - they wrote that the potential tightening of regulation is unlikely to have a serious impact on Pop Mart. The company does not disclose the structure of sales by age, but the main target audience is people between 18 and 45 years old, and the average customer buys three toys a year. Even in the event of stricter enforcement of age controls by retailers, the negative effect on Pop Mart would be minimal, according to analysts. Investment Bank believes that blind box sales remain important, but the main promotion is now through more sustainable channels - animation, social networks, theme parks and collaborations with major brands, which reduces dependence on "gambling" marketing practices.

UBS notes that the company has already brought its processes in line with the regulator's requirements: Pop Mart stores have implemented strict ID checks when selling "surprise boxes" to customers under 18. According to UBS, the negative effect will not be strong, as the company already complies with the requirements on age restrictions;

There are currently 26 analysts that have recommendations on Pop Mart, according to LSEG. The average target price is HK$256.6, up 2.8% from the closing price on July 3. 24 analysts recommend buying the comapny's shares, while two others recommend holding. 

Morgan Stanley on June 10 raised its target price on Pop Mart from HK$224 to HK$302, up 21% from the closing price on July 3. Morgan Stanley cites the viral spread effect through social media as a key driver of the company's growth. 

"While growth in 2025 has already been factored into the share price, we believe the potential for longer-term scale is still present," the bank said in its filing. Morgan Stanley expects Pop Mart's revenue to grow to $3.6 billion in 2025 and $6 billion by 2027, making it one of the fastest-growing consumer companies in history. Analysts also note that compared to global industry players such as Disney, Bandai Namco and Sanrio, Pop Mart enjoys higher operating margins because it owns the rights to its products and mostly sells them directly to consumers (not through franchises and store chains), which allows it to retain more than 90% of its revenue within its own sales channels. However, after the publication in "Zhenmin Zhibao", the investment bank replaced the Pop Mart shares in the list of priority investments for investments in China and Hong Kong with the securities of the insurance company PICC P&C.

UBS raised its target price to HK$329.2 from HK$216 to HK$329.2 in a June 11 2025 report, suggesting a 31.9% rise from the closing price on July 3. The bank's analysts also raised their adjusted net profit forecast for 2025-2027 by an immediate 27% to 47% - they see the launch of the revamped version of Labubu in April as a success and wrote about the continued growth in customer interest in the core product lineup such as Crybaby, Hirono and Twinkle Twinkle. "Compared to traditional Sanrio and Disney merchandise, we believe Pop Mart characters have a distinctive style and tone," UBS analysts wrote. 

The bank estimates that the company's revenue share in North America could grow from 6% in 2024 to 23% in 2025, making the US a key market alongside China (it has a 43% share).

On June 18, 2025, analysts at JPMorgan reiterated an "outperform" rating on Pop Mart stock and significantly raised their target price from $250 to $330, up 32.2% from the closing price on July 3. They wrote that in June, there were 400% more Google queries on Laboob than queries on Hello Kitty (vs. 200% in May and 100% in April). The bank also notes that markups for Pop Mart toys on the secondary market are up to 390% on Chinese platform Qiandao and up to 350% on marketplace StockX.

JPMorgan believes that the key catalysts for the stock growth will be the company's interim results report (August 26), the launch of cartoons Labubu & Friends and cooperation with Uniqlo. Among the risks, the investment bank noted difficulties with international expansion, increased competition and a possible increase in duties from the US. On its website, Pop Mart had previously written that it would bear the costs of increased US trade duties and "customers will not pay any additional customs fees". However, in April, the new Labooboo doll collection was already priced at $27.99, $6 more expensive than the previous series, CNN reported.

This article was AI-translated and verified by a human editor