Damo: Raise the target price of Bubble Mart (09992) to HK$224 to increase the rating

The Zhitong Finance App learned that Morgan Stanley released a research report stating that the basic target price for Bubble Mart (09992) was raised from HK$204 to HK$9.8% to HK$224, and the bank also raised Bubble Mart's most “bullish” (optimistic) and “bear” (pessimistic) target prices from HK$243 and HK$85, respectively, to HK$273 and HK$97. Damo raised Bubble Mart's 2025-27 sales and adjusted net profit forecast by 5-9%, and raised its earnings per share (EPS) forecast to 8.6% in 2025, 8.3% in 2026, and 7.5% in 2027.

Damo raised Bubble Mart's sales and profit forecasts to reflect the following points: 1) Labubu v3 is popular worldwide, particularly in the US. This momentum will drive the opening of new stores in the US and the rest of the world, which is the main driver of growth in 2025-26. Furthermore, stronger sales growth will further boost operating leverage. 2) The bank was surprised by the good performance of Vietnam's rapidly growing supply chain. It recently said that most US goods will be shipped from Vietnam in the third quarter of 2025. Coupled with the trade tension between China and the US, the impact of tariffs on profit margins may be less than expected by the bank. 3) The 12-27% increase in the price of new products in the US seems to be a good thing because they are accepted by consumers. As the impact of tariffs is likely to subside, an increase in its average selling price will increase US profit margins in the long run.