CICC: Maintains "Outperform" rating on BLOKS (00325) with a target price of HK$80, bullish on overseas and building block car growth potential.

CICC issued a research report maintaining an "Outperform" rating on BLOKS (00325) with a target price of HK$80, corresponding to P/E ratios of 21.8x and 17.1x for 2026 and 2027 respectively, implying 46% upside. The bank expects the company's adjusted net profit for 2026 and 2027 to be RMB790 million and RMB980 million respectively. The bank believes that BLOKS has entered a period of accelerating overseas growth. Based on its product strength and play creativity, the bank is bullish on the short-term growth momentum from overseas expansion and building block car volume ramp-up, and expects that in the medium to long term, with the advancement of the "Three All Strategy," the company is expected to further unlock growth space. CICC's main views are as follows: BLOKS overseas acceleration opens a new chapter Benefiting from outlet expansion and per-store productivity improvement, BLOKS' overseas revenue share exceeded 20% in 1H 2026; the share of adult-oriented products rose from 11% in 2024 to 25% in 1H 2026; building block cars accounted for 10.4% of revenue in 1H 2026. Overseas expansion and the extension of category price bands have contributed new growth poles for BLOKS and are also expected to reduce the impact of fluctuations in a single market and category on performance. In the short term, overseas channels and brand building remain in the investment phase, gross margins for new products such as building block cars are still ramping up, and profit margins are under temporary pressure. Globalization: Broad overseas addressable market space, precise positioning helps achieve share breakthroughs BLOKS is positioned in the market combining building and characters/vehicles. The bank estimates that its overseas addressable market size in 2025 was approximately US$27.75 billion, 7.9 times that of the Chinese market. Channel structures in major markets differ significantly, and BLOKS advances localization according to local conditions. The bank believes that the Americas are centered on the United States, with South America expanding relatively quickly and already entering the stage of outlet densification and shelf deepening; Europe has a good category and demographic base, and the company has established a new subsidiary in France and set up forward warehouses; Southeast Asia features broad convenience store coverage, with the focus shifting to per-store output. In terms of the competitive landscape, BLOKS engages in differentiated competition with major competitors such as LEGO, Bandai, and Hasbro through mass-market pricing. Building block cars: Innovative play, promising space BLOKS has launched buildable and modifiable building block cars, forming three price bands: C/E/S, with original car series and licensed real-car models to be launched successively. Benchmarking against the global leader, Hot Wheels generated revenue of US$1.75 billion in 2025, with a compound annual growth rate of 12.9% from 2020 to 2025. The bank believes that this category has a relatively high ceiling, and BLOKS' products also have advantages in play and pricing, with future growth promising. Risk warnings Uncertainty in IP renewals and licensing; overseas sell-through below expectations; intensifying competition in building block cars; slowing domestic demand; gross margin recovery below expectations; rising tariff and compliance costs.