Photo: VCG

Chinese mystery box maker Pop Mart saw its share price on Hong Kong stock market dive 7.75 percent on Monday morning but claw back 7.97 percent in afternoon trading following last week's IPO.

The toymaker's market capitalization surpassed HK$102.9 billion ($13.27 billion) at market close on Monday, following a jump of 100-percent during its IPO debut on Friday. 

Being highly popular has helped Pop Mart gain recognition from both consumers and investors, however, some observers have raised doubts about the toymaker's future earnings and believe that it is hard to see the company thriving long-term. 

"It is reasonable to hold a bullish short-term view on Pop Mart, it's clear it requires more investments in diversification, including its capability to enter the film and television sector, to operate a scalable toy community and even to build a theme park," said Wang Peng, an assistant professor at the Gaoling School of Artificial Intelligence at Renmin University of China.

Mainly through selling mysterious toy boxes that contain one toy figure in each box from a large selection of collectible figurines, the Beijing-based company made a stellar debut on the Hong Kong stock market on Friday with its market capitalization hitting $12.5 billion. 

According to the research firm Frost & Sullivan, the majority of Pop Mart's figurine purchasers are females aged between 15 and 35. The limited and exclusive editions particularly appeal to young people who are compelled to keep purchasing until they come across an exclusive figurine. 

Its popularity among young Chinese consumers has helped Pop Mart reap-in huge revenues. According to information publicized by Pop Mart to the Hong Kong Stock Exchange, company revenue grew for three consecutive years from 2017, rising from 158 million yuan ($24.16 million) in 2017 to 1.683 billion yuan in 2019. In 2018 and 2019, its year-on-year net margin growth soared by 6,119 percent and 353 percent. 

"However, what is the market scale of the mystery box in China? Will it become a key part of society? What is the purchasing power of Chinese young buyers?" Wang raised several questions and concerns addressing the prospective strategies of Pop Mart. 

According to Wang, in the short run, the toymaker has room for growth, but may suffer from weak momentum in the long run if it does not explore other sectors. 

Some commentators also said the mystery box of toys is essentially scamming young Chinese buyers who are paying over the odds for something of limited value. As tastes change, the optimal period for emerging products such as the mystery box will not last long, media reports cited commentator Guo Shiliang. 

Global Times