Pop Mart, a mainland toy retailer, is seeking a Hong Kong initial public offering to raise US$200 million (HK$1.56 billion) to US$300 million, with a goal to become a "Disney-like" intellectual property operator and pop culture promoter.

The Beijing-based company is reported to launch its IPO this quarter.

Founded in 2010, Pop Mart sells blind box toys, a type of packaging that keeps its contents hidden. It operated 114 retail stores and 825 roboshops, or vending machine stores, in over 50 mainland cites as of the end of 2019.

According to a commissioned Frost & Sullivan report, Pop Mart is the most popular pop toy brand in China, ranking the first in the mainland pop toy retailing market with a market share of 8.5 percent measured by retail value.

The company mainly engages in pop toy IP operations from artists development to pop toy culture promotion. It operated 85 IPs, including 12 proprietary IPs, as of May 22.

Meanwhile, it has hosted the largest pop toy conventions in China in terms of visits, namely the annual Beijing Toy Show and Shanghai Toy Show starting from 2017 and 2018, respectively. The number of registered members of the brand rose from 2.2 million at the end of last year to 3.2 million as of May 22.

Pop Mart made a foray into the pop toy market in 2017, when it started to see profits and was listed on the National Equities Exchange and Quotations. Revenue surged by more than 2.2 times each year from 158.07 million yuan (HK$175.87 million) in 2017 to 1.68 billion yuan in 2019, with its net profits expanding by more than 280 times to 451.12 million yuan last year.

The market size of pop toy retailing in China increased from 6.3 billion yuan in 2015 to 20.7 billion yuan in 2019, a compound annual growth rate of 34.6 percent, and is expected to further grow at a CAGR of 29.8 percent to 76.3 billion yuan in 2024, according to the F&S report.

Pop Mart finds from a commissioned survey that a majority of its target consumers are aged between 15 and 40, and over 45 percent of the respondents spend over 500 yuan on pop toys per year.

Wang Ning, founder and chairman of Pop Mart, earlier said in an interview that the firm could become the most "Disney-like" company in the mainland, which would have plenty of valuable IPs.

But the company, with only three-year experience in the market, is still facing risks from relatively short life cycles of consumer products based on pop culture, as well as a concentrated IP portfolio.

Among its IPs, the Molly character dolls, designed by Hong Kong toy designer Kenny Wong, took up 27.1 percent of its total revenue last year, larger than the total proportion of those from the other proprietary IPs.

The company warns it cannot assure that it will be able to design and develop products that will be popular with consumers.

Pop Mart had temporarily suspended 88 retail stores and 279 roboshops amid the coronavirus pandemic, which have been fully resumed. The Shanghai Toy Show this year has also been postponed from April to November, and the company expects the number of participating artists and fans will decrease due to travel restrictions.

The issuer has completed eight rounds of pre-IPO fundraising, receiving 958 million yuan from institutional investors including Sequoia Capital China, which holds 4.96 percent of its stake. Wang Ning holds 56.33 percent of pre-IPO shares of Pop Mart.

The company was valued at 2 billion yuan when it was delisted from the new third board, National Equities Exchange and Quotations, last year, while it was reported to be valued at between US$4 billion and US$5 billion after going public.

Pop Mart plans to use the net proceeds raised to expand its consumer access channels and overseas markets, fund potential acquisitions, invest in technology initiatives for marketing and fan engagement, expand its IP pool as well as for general corporate purposes.

Pop toy retailer in expanding market