Ever since Labubu dolls became a global sensation last year, every toymaker in China has been scrambling to position itself as the next Pop Mart. It's not hard to see why. Pop Mart's shares have skyrocketed since its 2020 IPO, giving it a market value of HK$255 billion ($32.6 billion). That's more than five times the valuation of Mattel (MAT), the company behind Barbie, if you can believe it.

The latest contender stepping into the ring is Sunny & Sandy (Hunan) Group Ltd., a previously little-known toymaker from Xiangtan in Central China's Hunan province. The company filed an application for a Hong Kong IPO last week, and it's bringing some serious credentials to the table.

We're talking Goldman Sachs and CICC as joint IPO sponsors, plus backing from heavy hitters like Hillhouse and Aurora Management. With its latest funding round valuing the company at 4 billion yuan ($574 million), an offering of 20% of its shares could pull in $100 million or more.

The IP Licensing Playbook

Here's where Sunny & Sandy differs from Pop Mart, which developed Labubu internally. Sunny & Sandy gets most of its intellectual property through third-party licensing deals. Like everyone else in the space, the company says it's considering developing its own IP, which is typically more profitable but requires massive marketing budgets and, frankly, a lot of luck. Another Pop Mart wannabe already waiting in the Hong Kong IPO queue is Miniso's (MNSO) Top Toy unit.

But don't let the licensing model fool you. Sunny & Sandy has some genuinely impressive numbers. The company has posted triple-digit year-over-year revenue growth for two straight years, including that eye-popping 134% jump to 386.5 million yuan ($55.4 million) in the first nine months of last year. Its gross margin has climbed steadily from 16.9% in 2023 to 35.3% in the first nine months of 2025, helping the company turn its first-ever profit in 2025.

When founder Yang Jie launched the company in 2015, naming it after his own English name and his daughter's, the current collectible doll craze wasn't even on the horizon. Armed with a bachelor's degree in business English, Yang started out manufacturing plastic premium giveaways and cereal prizes for Fortune 500 companies from a factory in Xiangtan. By 2017, Sunny & Sandy was using an innovative injection molding process to produce 1 million units annually. Five years later, that figure had quintupled.

Yang's breakthrough came in 2022 when he started selling toys for just 9.9 yuan and less under licensing deals with Paramount for SpongeBob SquarePants and with Sanrio, owner of Hello Kitty. Through last September, the company had sold over 3.5 million SpongeBob toys and nearly 20 million Sanrio products.

The Ne Zha 2 Jackpot

But the real game-changer arrived in September 2024, when Sunny & Sandy became the exclusive licensee for 3D plastic merchandise based on "Ne Zha 2." The film became China's and the world's highest-grossing animated movie of all time, and that exclusive deal is what turbocharged the company's recent revenue explosion.

According to the prospectus, the collaboration with "Ne Zha 2" owner Enlight Media lasted 12 months. That was enough to nearly quadruple the company's sales volume from 16.4 million units for IP toy products in the first nine months of 2024 to 58.1 million units in the same period in 2025. That license has likely expired by now, but the company is banking on its next big thing: a 13- to 16-month worldwide license to design and sell FIFA World Cup 2026 mascot-themed figurines across 60 countries and regions.

So what gives Sunny & Sandy an edge? Speed, for one thing. The company believes its competitive advantage lies in technology that allows it to deliver products in record time, which matters enormously in the fast-moving world of trendy toys. After receiving the material library from "Ne Zha 2," it took just three months to complete product design, mold development, mass production and delivery.

Sunny & Sandy says it's "the only IP toy company in the world that applies patented multi-color and multi-material injection-molding technologies." This was a major leap from the traditional approach it used to rely on, which involved labor-intensive manual assembly and spray painting of plastic figurines. The new process delivers yield rates exceeding 99.5%, compared to industry averages of 90% to 95%, while also keeping defect rates low.

The Factory of the Future

The ability to fully automate production has also enabled Sunny & Sandy to offer its toys at rock-bottom prices. Its products carry a recommended retail price of 9.9 yuan or less per unit, which has helped it expand rapidly into price-sensitive lower-tier markets. According to independent research cited in its prospectus, the company is China's leader in mass market three-dimensional IP toys priced at or below 20 yuan. It has relationships with 13 retailers covering over 32,000 points of sale.

Scale is another major strength. Sunny & Sandy's five existing factories can churn out 1 million units per day. Its latest facility in Guangdong province, which opened in December, is a 'lights out' factory that uses robots to manufacture around the clock. It has a designed capacity of 95.4 million units annually with plans to expand to 200 million units. A sixth factory in Gansu province will add capacity of 112.9 million units.

The Risks Ahead

With so much momentum, what could possibly derail this story? Well, lightning rarely strikes twice. There's no guarantee Sunny & Sandy will find new intellectual properties to replace the runaway success of Ne Zha 2. The company has several irons in the fire, including rights for "Nobody," another popular animation fantasy film, and "Dasheng Rises," the sequel to a wildly popular 2015 animation based on the classic novel "Journey to the West." But realistically, the odds of any of those matching Ne Zha 2's massive success are pretty slim.

The rapid scale-up also comes with downsides. The company's inventory ballooned from 33.5 million yuan in 2023 to 125.7 million yuan in the first nine months of 2025. That creates serious pressure to sell products at a discount or write them off entirely if they don't move quickly in such a fast-paced market.

The company did turn profitable in the first nine months of last year, posting a profit of 43 million yuan versus a 12 million yuan loss a year earlier. But it will need to prove it can maintain profitability, which might be challenging given the fierce competition in China's increasingly crowded collectible toy market. The question investors will ask is simple: can Sunny & Sandy keep finding hits, or was Ne Zha 2 just a lucky break?