UOB Kay Hian
Date of Report: Tuesday, 15 July 2025
QuantaSing Group: Strategic Transformation Drives Growth in China’s Booming Pop Toy and Silver Economies
Introduction: UOB Kay Hian Initiates Coverage on QuantaSing Group
QuantaSing Group (QSG US) has emerged as a leader in lifestyle enhancement solutions, focusing on delivering accessible and affordable wellness-oriented services and products, both online and offline. The company has recently diversified into the high-growth pop toy market, positioning itself to capitalize on China’s rapidly expanding “happiness economy.” UOB Kay Hian initiates coverage with a BUY rating and a target price of US\$16.00, representing an upside of 79.6% from the current share price of US\$8.91.
Company Overview: QuantaSing’s Expanding Horizons
– GICS Sector: Consumer Discretionary
– Bloomberg Ticker: QSG US
– Shares Outstanding: 34.5 million
– Market Cap: US\$455.4 million
– 3-Month Avg Daily Turnover: US\$11.2 million
– 52-Week Price Range: US\$1.50 – US\$15.64
– Major Shareholders:
- Even Par Holding Limited: 32.5%
- DCM Entities: 18.7%
- K2 Entities: 15.2%
– Y25 NAV/Share: RMB 5.58
– Y25 Net Cash/Share: RMB 6.94
Recent Strategic Moves: Entry into the Pop Toy Market
QuantaSing’s acquisition of a 61.05% stake in Shenzhen Yiqi Culture Co (Letsvan) on 24 March 2025 marks its formal entry into the rapidly growing pop toy and IP consumer market. Letsvan is recognized for its full-chain capabilities in IP incubation, commercial operations, and international expansion, with a strong product portfolio centered around hit IPs such as WAKUKU and ZIYULI. QSG intends to leverage its expertise in online marketing and channel resources to further expand Letsvan’s reach.
Highlights of the Letsvan Acquisition
– Letsvan specializes in character-based collectibles, with robust distribution through major retailers such as Miniso and Top Toy, e-commerce platforms like Tmall and Douyin, and offline stores across China and Southeast Asia. – The company is led by founder Huiyu (Zack) Zhan, whose Japan experience brings deep aesthetic insights to Letsvan’s studio-like model. – The WAKUKU brand, launched in 2024, quickly gained popularity through its innovative “sugar-plush” design, celebrity endorsements, and successful pop-up stores. – Letsvan’s IP creation competencies are complemented by strong partnerships with leading pop toy retailers. – QSG plans to expand the IP portfolio to 20 by FY26, with 1-2 new character launches scheduled for June–July 2025, including an elf-themed IP.
Financials: Attractive Valuation and Strong Growth Outlook
QSG’s acquisition of Letsvan was completed at an attractive valuation, with a FY26F price-to-sales (PS) ratio of less than 1x, compared to Pop Mart’s notably higher 2025F PS of 13x. Management projects Letsvan will contribute RMB 550 million in revenue to QSG in FY26, with a target of over RMB 1 billion in collectibles revenue by FY27. This positions QSG as a leading IP-driven pop toy company in China.
Key Financial Table
Year to 30 Jun (RMBm) |
2023 |
2024 |
2025F |
2026F |
2027F |
Net Turnover |
3,081 |
3,795 |
2,672 |
2,475 |
2,915 |
EBITDA |
(110) |
382 |
350 |
296 |
415 |
Operating Profit |
(114) |
377 |
347 |
295 |
415 |
Net Profit (reported/actual) |
(131) |
406 |
294 |
296 |
391 |
Net Profit (adjusted) |
83 |
423 |
316 |
321 |
415 |
EPS (fen) |
(310.3) |
222.9 |
165.0 |
168.2 |
226.7 |
PE (x) |
n.a. |
8.3 |
13.5 |
13.0 |
10.1 |
P/B (x) |
9.9 |
6.8 |
4.6 |
3.4 |
2.6 |
EV/EBITDA (x) |
n.a. |
6.8 |
9.1 |
10.7 |
7.7 |
Dividend Yield (%) |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Net Margin (%) |
2.7 |
11.2 |
11.8 |
13.0 |
14.2 |
Net Debt/(Cash) to Equity (%) |
(341.7) |
(151.0) |
(124.5) |
(119.8) |
(124.1) |
ROE (%) |
n.a. |
109.6 |
41.0 |
27.7 |
27.7 |
Capitalizing on China’s Robust Pop Toy Market
China’s pop toy market is experiencing robust growth, with a projected five-year CAGR of 17.7%, expanding from RMB 40.3 billion in 2023 to RMB 91.1 billion by 2028. This growth outpaces the global pop toy market’s CAGR of 9.3% over the same period. QSG’s timely entry, strong IP portfolio, and competitive valuation position it as a major beneficiary of this trend.
Riding the Silver Economy and Expanding User Base
QSG boasts a comprehensive portfolio of individual online learning services for adults, addressing diverse personal development needs. As of FY24, the company had amassed 127.6 million registered users. With an aging society, QSG is broadening its service offerings for the “silver generation” by developing new wellness and recreation-related courses, wellness products, and even study tourism options.
Business Model Restructuring and Earnings Outlook
QSG is restructuring to achieve sustainable long-term earnings growth: – Revenue is forecast to grow at a three-year CAGR of 22% in FY26–29, primarily driven by a 63% CAGR in the pop toy segment. – Gross margins are expected to decline to 82% (FY25), 59% (FY26), and 54% (FY27) due to lower pop toy margins and higher customer acquisition costs for e-commerce. – The company is developing private label products in wellness categories, promising strong profit and margin potential. – Non-GAAP net profit is estimated to decline 23% YoY in FY25 but grow 1% and 32% YoY in FY26 and FY27, respectively, as pop toy growth ramps up. – Net margin is projected to remain healthy at 11.0% (FY25), 12.0% (FY26), and 13.4% (FY27).
Valuation: SOTP Approach Highlights Upside
The target price of US\$16.00 is based on a sum-of-the-parts (SOTP) valuation:
- 6x PS or 20x FY26F PE for the pop toy segment (Letsvan)
- 5x FY26F PE for online learning courses
- Net cash position of RMB 1.1 billion
QSG’s robust balance sheet, with cash reserves of RMB 1.1 billion and minimal recent debt, enhances its investment appeal.
SOTP Valuation Breakdown (FY26F)
Business Segment |
Revenue (RMBm) |
Net Profit (RMBm) |
PS |
PE |
To QSG (RMBm) |
Individual Online Learning Services |
1,504 |
165 |
— |
5 |
827 |
Enterprise Services |
184 |
28 |
— |
6 |
165 |
Letsvan |
550 |
165 |
6 |
20 |
3,300 |
Consumer Business |
204 |
25 |
1 |
8 |
204 |
Others |
33 |
5 |
1 |
— |
33 |
Net Cash |
1,656 |
– Exchange rate: RMB/US\$ 7.2
– No. of shares (mn): 54
– Target Price (US\$/share): 16.00
Earnings Revision and Risks
Key risks to QSG’s outlook include:
- Service offerings with limited track record
- Uncertainties around top-line growth, particularly in the weakening traditional course segment
- Competitive pressures in the live-streaming e-commerce space
Share Price Catalysts
Potential drivers for share price appreciation include:
- Success in the pop toy segment
- Increasing share and monetization of the silver economy
Conclusion: QSG Positioned for Multi-Engine Growth
QuantaSing Group’s strategic transformation—anchored by its acquisition of Letsvan and expansion into the pop toy market, alongside strong positioning in the silver economy—sets the stage for robust growth in the coming years. With a compelling valuation, solid financials, and new growth drivers, QSG stands out as a prime opportunity in China’s evolving consumer landscape. UOB Kay Hian’s BUY rating and US\$16.00 target price underscore the substantial upside potential for investors.
Analyst Contacts