TOP TOY-The Independence Test Amidst High Growth Allure

ZC Asia has learnt that the Hong Kong Stock Exchange's Main Board has recently welcomed another player in the trendy toy sector – TOP TOY Holdings Limited (hereinafter referred to as ‘TOP TOY’) has formally submitted its listing application, with J.P. Morgan, UBS Group and CITIC Securities acting as joint sponsors.

TOP TOY is a trendy toy brand incubated by Miniso Group (09896.HK, MNSO.US) in 2020. Its product portfolio spans core categories including blind boxes, action figures, building blocks, and assembly models, with operations encompassing the licensing, proprietary IP development, and third-party brand toy distribution. In recent years, it has rapidly expanded with the backing of its parent company's resources, yet its operational independence and profitability quality have become focal points of market scrutiny.

Significant Growth Amid Emerging Concerns

Financial data indicates TOP TOY exhibits robust growth momentum. From 2022 to 2024, the company's revenue surged from RMB 679 million to RMB 1.909 billion, achieving a compound annual growth rate of 67.7%. Revenue further increased to RMB 1.36 billion in the first half of 2025, representing a 58.5% year-on-year rise.

Regarding profitability, TOP TOY successfully turned a profit in 2023, achieving a net profit of RMB 212 million. This figure grew further to RMB 293 million in 2024. Net profit for the first half of 2025 stood at approximately RMB 180 million, representing a year-on-year increase of 26.8%. The gross profit margin rose from 19.9% in 2022 to 32.7% in 2024. Although it declined slightly to 32.4% in the first half of 2025, it remained at a relatively high level.

Market data indicates TOP TOY has established a foothold in the collectible toy sector, capturing approximately 2.2% market share in 2024. This positions it as a significant industry player, trailing only Pop Mart and LEGO. Nevertheless, a notable gap persists compared to leading enterprises.

Comparative analysis reveals that Pop Mart achieved a gross profit margin of 66.8% in 2024, substantially exceeding TOP TOY's 32.7%. In terms of profitability, TOP TOY's net profit scale falls short of one-tenth of Pop Mart's.

Nevertheless, TOP TOY faces multiple challenges amid its rapid expansion. In the first half of 2025, the company's sales and distribution expenses surged by 102.4% year-on-year, substantially outpacing the 58.5% revenue growth. This primarily stemmed from increased personnel remuneration, cross-border logistics costs, and rising store rental expenses associated with overseas expansion.

Regarding cash flow, the company exhibits a ‘one positive, two negative’ pattern: net cash flow from operating activities remains positive, but cash flow from investing activities remains negative due to store expansion and IP licensing, while cash flow from financing activities also remains negative due to loan repayments and shareholder dividends. This structure may necessitate reliance on external financing to bridge liquidity gaps.

Imbalanced IP Structure with Core Licences Facing Expiry Risks

As the core asset of a trendy toy enterprise, TOP TOY has established a matrix structure centred on licensed IPs, supplemented by proprietary IPs. The company holds 43 licensed IPs, including globally renowned brands such as Disney, Sanrio, and Gundam. These licensed IPs contributed RMB 889 million in revenue during 2024, forming the primary income stream.

By contrast, its 17 proprietary IPs—including Juejue Sheep, Nuomier, and Lucky Cat—generated merely RMB 6.8 million in 2024, accounting for an extremely low proportion of toy product revenue. Furthermore, several core licensed IPs, including Sanrio, Disney, ‘Piggy Hero’, ‘Crayon Shin-chan’, and ‘Neon Genesis Evangelion’, will expire successively between 2026 and 2028, introducing uncertainty regarding future business continuity.

Regarding channel distribution, TOP TOY heavily relies on a ‘franchise + distributor’ model. As of 30 June 2025, the company operated 293 stores, including 15 overseas outlets. Revenue from offline distributors consistently accounted for approximately 50% of total income.

Notably, parent company MINISO provides significant channel support to TOP TOY. Data indicates that MINISO contributed 36.8%, 53.5%, 48.3%, and 45.5% of TOP TOY's total revenue during the reporting periods respectively, reflecting the company's substantial dependence on its parent company's distribution channels.

Prior to its IPO, TOP TOY completed a Series A financing round led by Temasek, achieving a post-investment valuation of approximately RMB 9 billion, thereby strengthening its position for listing. However, the company faces the challenge of balancing short-term growth with long-term development.

For investors, TOP TOY's long-term value hinges not only on its earnings growth trajectory but also on whether it can achieve substantive breakthroughs in areas such as IP self-sufficiency, channel independence, and financial structure optimisation. Against the backdrop of intensifying competition within the collectible toy sector, TOP TOY's capacity for ‘independent operation’ will serve as a crucial yardstick for the market in assessing its investment merit.

Disclaimer: The content herein is for reference only and does not constitute any form of investment advice. Should any information contained herein prove inaccurate, incomplete, or potentially misleading, please refer to the company's official announcements. Market risks exist; investment requires caution.