Equity Research

Following a strong share price performance for Pop Mart (YTD+169%, or +more than 10x since 2024) and Bloks (YTD +54%), we see increasing market debates on IP cycles, the sustainability of growth, the size of the TAM, and share price drivers. While the cycle for a single IP is usually short (approximately 2-3 year cycle for popular IPs in the past few years), we note that development of a comprehensive IP platform could help to extend IP popularity duration, smooth company-level earnings cycle, and deliver more sustainable share price outperformance. On share price drivers, we believe companies at different stages may react differently. 

Overseas markets have become increasingly important for the long term development of China's staple companies particularly amid the soft domestic macroeconomic backdrop and growth deceleration in the past few years. With deflationary pressure in China, condiments companies are exploring overseas opportunities, especially in Southeast Asia given its proximity, relatively similar diet, favorable demographic trends, growing income, and it is seeing 3~5% volume / 3~4% RSP growth across countries in 2024-29E (Euromonitor). Our analysis suggests that, within Southeast Asia, Indonesia offers the brightest growth outlook for condiments with a c.10% CAGR in 2024-29E (Euromonitor), driven by both volume (at 5.1% CAGR) and trading-up/price hikes (RSP at 4.5% CAGR).

Also see: Foshan Haitian (603288.SS / 3288.HK): Solid business, positioned for share consolidation; reinstate A-share at Neutral / initiate H-share at Buy

 China Resources Beverage (2460.HK): Channel reform to take time to bear fruit amid intensive competition; downgrade to Neutral