How to reproduce:
1. Open the attached “initialization_issue.zip” project
2. Open the SampleScene
3. Select the “testobject” under the “parent” GameObject in the Hierarchy
4. In the Inspector, set the “mat” field of the “Test Script” component to the “red” material
5. Duplicate (CTRL-D) or copy-paste (CTRL-C, CTRL-V) the “testobject”
6. Observe that the material of the duplicated GameObject does not change

Expected result: The material is applied to the GameObject when the Prefab is duplicated.
Actual result: The material is not applied when the Prefab has a parent

Reproducible in: 2022.1.0a12, 2022.3.13f1, 2023.1.20f1, 2023.2.0b18, 2023.3.0a14
Not reproducible in: 2021.3.31f1, 2022.1.0a11

Reproducible on: Windows 11
Not reproducible on: No other environments tested

Notes:

• When the Prefab has a parent, five functions are called when it is duplicated in the Hierarchy. However, when the Prefab has no parent, only three functions are called (see attached images).
• Workaround (After performing the reproduction steps):
• 1. Drag and drop the original “testobject” out of the “parent” GameObject in the Hierarchy (make sure “testobject” does not have a parent)
• 2. Repeat reproduction step 5
• 3. Observe how the duplicated GameObject now applies the correct material