When the box office boom of "Nezha 2" swept across the country, the cards jointly created were actually hyped up in the second-hand market - a Nezha card signed by the director was hyped up to 95,000, which can be called "electronic gold". The creator behind the cards is Zhejiang Kayou Animation Co., Ltd. (hereinafter referred to as "Kayou"). This company that relies on 2 yuan per pack of cards to earn 10 billion yuan per year is rewriting the rules of the Chinese toy industry at an astonishing speed, but it has laid a dark thunder in the capital market due to its rush.

In 2024, Kayou's revenue exceeded 10 billion yuan, reaching 10.057 billion yuan, a year-on-year increase of 278%. Its money-making ability even surpasses Pop Mart, which "makes young people crazy". On April 14, Kayou Company made a second sprint to the Hong Kong Stock Exchange. In addition to the jealous and profitable business, what lingers on it is long-term trapped in negative public opinion such as "harvest elementary school students", "indulging in underages", and "addiction to primary school students' card collection".

01 How profitable is Kayou?

In the venture capital circle, Kayou is called a "child harvester", and its core IP "Ultraman series card" has firmly locked in the elementary school student group.

In 2024, Kayou's revenue reached 10.057 billion yuan, net profit reached 4.466 billion yuan, and gross profit margin was 67.3%. You should know that Pop Mart, which is a big hit in the world, had revenue of 13.04 billion yuan and net profit of 3.125 billion yuan. Such financial data has already amazed the outside world.

The gross profit margin of Card Game's core business, focusing on Card Game's central business, is as high as 71.3%. In 2024, Card Game's single sales were about 8.2 billion yuan, accounting for 81.5% of Card Game's total revenue. If calculated based on an average of 10 yuan per pack, this means that each pack costs less than 3 yuan, you can earn more than 7 yuan by replacing the hand. This kind of money printing machine-like business model has formed a new myth of wealth creation.

Back then, Pop Mart launched a "blind box economy", bringing a huge consumer market for young people around the world. Now some analysts predict that once Kayou is successfully listed, its potential in the capital market may be worth HK$240 billion.

The reason why Kayou makes so much money is thanks to the "grill economy" of Generation Z. The so-called "guzi" (homniverse of Goods) is the IP peripherals that make 2D enthusiasts crazy - badges, stand cards, and of course, the secret skills of card games: cards. CCTV data shows that the number of discussions on social platforms exceeded 1.1 billion times last year for the keywords "eating grain" and "grilled grain". All the performance of backward pushing Kayou is closely related to its founder.

02 The "God of Gambling" in the card world

From a water conservancy officer to a billionaire, Li Qibin, a 53-year-old Zhejiang businessman, has a legendary life trajectory. When he was a water conservancy officer in his early years, he saw a business opportunity because of a pack of bubble gum: his price of a few cents doubled due to a sticker. In 2001, he founded the Beetle Group and started with anime toys, but in 2016 he fell into a crisis of breaking the capital chain due to blind expansion. At that time, he might not have expected that the turning point of fate was hidden in a small card.

Li Qibin found that the best thing to do in the card business is the child group. In the 1990s, China had a wave of "little raccoons are just a trend", and the little raccoons are one of the most popular snacks for students. Of course, the most important thing for students to love the raccoon noodles is that they will randomly come with a card. In 2018, Li Qibin bet on the exchange card track, won the Ultraman IP authorization, and launched the "Hero Confrontation Card". Blind draw mechanism, scarcity of rare cards, low cost and huge profit space - this palm-sized card has become an "emotional business" more extreme than blind boxes. In 2024, Kayou's revenue exceeded 10 billion yuan, and its gross profit margin reached 67.3%.

(Li Qibin, Chairman of Zhejiang Kayou Animation Co., Ltd.)

In the early days, Ultraman contributed 60% of its revenue, but the risk of a single IP broke out in 2023: Losing infringement lawsuits and fan aesthetic fatigue, the company's revenue plummeted by 35.6%. At the moment of life and death, Little Pony took over as the new engine. This female IP, which has been cold in Europe and the United States, was dismantled into series such as Star Packages and Huiyue Packages in the hands of card games. In conjunction with the stimulation of live card opening, it accurately sniped female users aged 24-40. In the Douyin live broadcast room, Little Pony's annual sales exceed 25 million yuan, and the second-hand market premium exceeds ten times.

As of the end of 2024, Kayou holds more than 70 heavyweight IPs including Ultraman, Naruto, Detective Conan, Harry Potter, Ye Luoli, Douluo Continent, etc. These IPs enable Kayou's card products to cover young consumer groups with diverse personalities. But IP dependence is always following. In 2024, the top five IPs contributed 86.1% of revenue. 69 of Kayou’s IPs are authorized IPs, 38 authorization agreements will expire in 2025, and 39 will expire in 2026. Among all IPs, there are only 10 IPs with revenue of over 100 million yuan. In comparison, Pop Mart's revenue exceeded 100 million during the same period was 13 IPs.

Kayou also mentioned in its prospectus that it faces risks related to IP authorization. If the IP authorization arrangement is not obtained, maintained or recontinued under favorable terms, or the IP partner fails to maintain and protect its IP, the business, financial condition and operating results may be materially adversely affected.

Li Qibin’s response strategy is to “walking on two legs”: self-developed Three Kingdoms IPs enter the adult male market, and at the same time embed the card gameplay into the game, trying to create a moat of “collection + battle”. However, when the cards of "Nezha 2" were hyped into futures, doubts resurfaced: How long can this game of passing the flowers last?

03 Gambling and channel secret battles on the capital gambling table

In recent years, live card opening has become a new type of blind box, which not only captured a group of young people, but also became the favorite of many minors. Many families have spent thousands or even tens of thousands of yuan on this. According to China News Service, minors are addicted to card removal, and some earn millions a month.

Through a 500,000 terminal network built by 217 dealers, combined with the adrenaline stimulation of online live streaming, the transformation of the exchange-type cards from children's toys to adult collectibles. Another battlefield for Kayou is in the corner stationery store in third- and fourth-tier cities. Today, Card Game holds 70 IPs, and its dealer network penetrates into the county stationery store like capillaries, and sells 4.8 billion packs of cards in 2024.

But crazy expansion lays hidden dangers. Problems such as young players are addicted, parents complaints, and out of control of channel management are frequently occurring. On the Black Cat Complaint Platform, many complaints focus on the issues of "inducing minors to consume" and "minors do not give refunds". Some consumers reported that their minor children had drawn cards on the card game card draw machine without permission, and the merchants used the ultra-low rare card winning rate to induce it. Some consumers believe that Kayou lacks a verification mechanism when handling orders for minors, and there are problems with forced transactions and lack of refund channels. At the same time, the customer service attitude is also dissatisfactory.

Starting from 2023, Kayou will turn to the "joint venture model", turning franchisees into investors, and stores are operated by companies, trying to find a balance between scale and risk control. At the same time, Kayou Center replaced street shops and tried to use standardized stores to improve the brand tone. But the temptation of the sinking market always exists. After all, the cost of a card is less than 50 cents, and it can be earned by selling it to a county child.

The greater concern is hidden in the financial data. In order to sprint for Hong Kong stock listing, Kayou signed a bet agreement with investors: if the IPO is not completed before 2026, the shares must be repurchased, with an annual interest rate of 8%. At the end of 2024, the company's financial liabilities soared to 7.552 billion yuan, while the cash and cash equivalents on the Kayou account were 4.879 billion yuan.

Li Qibin also met the same capital "noble" as Wang Ning, the founder of Pop Mart. In June 2021, Kayou received investment from Sequoia Capital and Tencent. However, Kayou's IPO journey has not been smooth. Currently, the Li Qibin family holds 83.5% of the equity, and is the actual controller of the company, and the pressure to go public is increasing day by day.

At the beginning of 2024, Kayou officially submitted a prospectus to the Hong Kong Stock Exchange, intending to list on the main board, with Morgan Stanley, CICC and JPMorgan Chase serving as joint sponsors. In March 2024, the China Securities Regulatory Commission announced the list of supplementary materials for overseas issuance and listing filing, which was included. The materials required by the China Securities Regulatory Commission to supplement mainly involve whether there are abnormal equity incentive plans and data security.

In addition, Kayou seems to have predicted the dilemma of going overseas. When Little Pony Little Pony was authorized to land in Japan and South Korea, Li Qibin chose to break through from local culture: IPs such as Nezha and the Three Kingdoms were regarded as cultural export tools. But reality is slim - Japan has a card universe built by Pokémon, the United States Magic Dominates the world with the rules system, and the "Oriental Disney" dream of card games is still trapped in the OEM thinking. Zhuoshi Consulting pointed out that its overseas revenue accounts for less than 5%, while giants such as Hasbro and Nintendo have long built high walls with IP matrix. When capital urges to tell new stories, can Kayou find a balance between IP innovation, channel control and overseas expansion?

From a water conservancy officer to a billionaire, Li Qibin’s myth of making money reflects the ultimate imagination of China’s consumer market. But the essence of the card economy is still a "psychological account game" created by using scarcity. When the popularity of Nezha cards fades, Card Games needs to prove that it is not just an IP reseller, but a spiritual business that can penetrate generations and borders with cultural symbols like Pop Mart. This gamble with capital, time and culture may have just begun.