BLOKS(0325.HK) 模型更新

BLOKS (0325.HK) Model Update CITI’S TAKEWe trim our 2026-28E earnings forecast by 11-15% mainly on more prudent margin profile. The recovery of gross margin could be slower thanexpected affected by mold investment, rising raw material costs andshipping costs, and gross margin may still face downward pressure in2026. In 1H26E, we expect +29% yoy revenue growth, assumingdecelerated growth in China on destocking initiatives while the overseasmarket continues to outpace. We model a consecutive downward trend ingross margin in 1H26E vs. 2H25 and forecast adj. net profit to grow by+10% yoy in 1H26E. We expect sequential margin recovery in 2H26Eshould gross margin stabilize. As such, we lower our TP to HK$71 (fromHK$88 previously). Lydia LingAC+852-2501-2475lydia.w.ling@citi.com Bull/Bear: BLOKS BLOKS Valuation Our DCF-based target price for BLOKS is Rmb71. We use DCF to value BLOKS as we believe this best captures the company’shigh growth underpinned by ramp up of new categories, new product launches, broadening IP portfolio and overseas expansion.Our DCF valuation is based on a WACC of 11.0% (3% risk-free rate, 7.6% risk premium and a beta of 1.05) and a terminal growthrate of 4%. Risks Our quantitative model rates the stock High Risk for its short listing history, but we override it considering Bloks’s qualitativefactors such as its solid revenue growth in the past few years and strong execution capability. Key downside risks that couldimpede our TP include: 1) failure to renew licensed IPs; 2) high reliance on individual IPs and single category products; 3) globalexpansion disappointments; 4) rising competition in China’s IP toy market; and 5) more stringent regulations. If you are visually impaired and would like to speak to a Citi representative regarding the detailsof the graphics in this document, please call USA 1-888-500-5008 (TTY: 711), from outside theUS +1-210-677-3788 Appendix A-1 ANALYST CERTIFICATION The research analysts primarily responsible for the preparation and content of this research report are either (i) designatedby “AC” in the author block or (ii) listed in bold alongside content which is attributable to that analyst. If multiple ACanalysts are designated in the author block, each analyst is certifying with respect to the entire research report other than(a) content attributable to another AC certifying analyst listed in bold alongside the content and (b) views expressed solelywith respect to a specific issuer which are attributable to another AC certifying analyst identified in the price charts orrating history tables for that issuer shown below. Each of these analysts certify, with respect to the sections of the reportfor which they are responsible: (1) that the views expressed therein accurately reflect their personal views about eachissuer and security referenced and were prepared in an independent manner, including with respect to Citigroup GlobalMarkets Inc. and its affiliates; and (2) no part of the research analyst's compensation was, is, or will be, directly orindirectly, related to the specific recommendations or views expressed by that research analyst in this report. IMPORTANT DISCLOSURES Citigroup Global Markets Inc. or its affiliates received compensation for products and services other than investment bankingservices from BLOKS in the past 12 months.Citigroup Global Markets Inc. or its affiliates currently has, or had within the past 12 months, the following as clients, and theservices provided were non-investment-banking, securities-related: BLOKS.Citigroup Global Markets Inc. or its affiliates currently has, or had within the past 12 months, the following as clients, and theservices provided were non-investment-banking, non-securities-related: BLOKS. Analysts’ compensation is determined by Citi Research management and Citigroup’s senior management and is based uponactivities and services intended to benefit the investor clients of Citigroup Global Markets Inc. and its affiliates (the “Firm”).Compensation is not linked to specific transactions or recommendations. Like all Firm employees, analysts receivecompensation that is impacted by overall Firm profitability which includes investment banking, sales and trading, andprincipal trading revenues. One factor in equity research analyst compensation is arranging corporate access events betweeninstitutional clients and the management teams of covered companies. Typically, company management is more likely toparticipate when the analyst has a positive view of the company.For financial instruments recommended in the Product in which the Firm is not a market maker, the Firm is a liquidity provider in such financial instruments (and any underlying instruments) and may act as principal in connection with transactions insuch instruments. The Firm is a regular issuer of traded financial instruments linked to securities that may have beenrecommended in the Product. The Firm regularly trades in the securities of the i