Futu News reported on January 9. $BLOKS (00325.HK)$ Today, the dark market opened high, closing up 73.49% at HKD 104.70, with a transaction volume of HKD 0.469 billion; each hand is 300 shares, earning HKD 13,305 per hand before fees.

Market data source: Futu Securities >

Investment Highlights

Strong market growth: since 2016, the company has been dedicated to the design, development, and sale of building block toys. Starting with building block toys, a rich knowledge of building toys has been accumulated, laying a solid foundation for expanding the company's product portfolio. According to data from Frost & Sullivan, China's building character toy market has grown from RMB 1.2 billion in 2019 to RMB 5.8 billion in 2023, with a compound annual growth rate of 49.6%, and is expected to increase from RMB 5.8 billion in 2023 to RMB 32.5 billion in 2028, with a compound annual growth rate of 41.3%.

A rich IP matrix: the company's own IP and well-known Licensed Intellectual Property (IP) form a rich IP matrix. The company has successfully launched two own IPs, including the children’s educational toy Alterable Block and the China traditional culture-themed Hero Infinite. The company's building character toys can efficiently realize the commercialization of IP on a large scale, making the company a preferred partner for many well-known IP copyright holders. The prospectus shows that as of the last practicable date, the company has obtained authorization for about 50 well-known IPs, including Ultraman, Transformers, Naruto, Pokémon, Kamen Rider, Hatsune Miku, and DC Superman.

Risk Warning

Market development uncertainty: During the record period, most of the company's revenue came from toy product sales. The development of the toy market faces uncertain factors that may be influenced by the ever-changing social and economic environment and the increasingly changing consumer preferences. In particular, toys compete with other entertainment options, such as video games, for consumer attention and overall spending. In addition, toys are discretionary consumer items, and consumers' spending patterns are affected by factors such as economic conditions, demographic changes, social and cultural trends, and uncertainties in future economic prospects. Any downturn in the global toy market as a whole could have a significant adverse impact on the company's future prospects, business, operational performance, and financial condition.

Raw material supply uncertainty: The raw materials used in the production and packaging of the company's products primarily include ABS and paper materials. Raw materials are crucial because they directly affect the quality, appearance, and texture of the products. The company employs strict standards to assess the qualifications of raw material suppliers. The company's raw material supply may face risks associated with factors that are beyond the company’s control (such as labor shortages and natural disasters). Any shortages, price fluctuations, or interruptions in the supply of raw materials used in the production of the company’s products could interrupt production, preventing the company from providing sufficient products to meet market demand, leading to sales losses.

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Editor/Hao