Core views

We previously suggested that in addition to the main line of going overseas this year, the company's domestic expansion category is also worth paying attention to. Recently, the company launched new building blocks and cards. Among them, the Building Block Monsters Forest Secret Base series went on sale in mid-June, and the price for the full set of 5 scenes was 1,335 yuan.

1. Expand the incremental track, and the market space is large: According to Frost & Sullivan, the GMV of the global building toy market in 2023 is 176.5 billion yuan, and is expected to grow to 354.6 billion yuan in 2028, with a CAGR of 15.0%.

2. Increased product interaction and fun: Compared with previous blind boxes, dolls, derivatives, etc., building blocks carry IP intentions while adding more hands-on and fun.

3. Further broaden IP fan portraits: Building blocks are a toy category for all ages and genders. It can expand the portraits of buyers and further break the IP circle.

4. Healthier revenue structure: Currently, the company's share of blind box revenue has dropped to 70%, and behind it is the company's ability to expand new categories based on IP.

We expect the company to achieve revenue of 8.26 billion, 10.05 billion, and 11.76 billion yuan in 24-26, up 31.1%, 21.7%, 17% year-on-year, and achieve non-GAAP net profit of 1.63 billion, 2.01 billion, and 2.38 billion, up 37.1%, 23.3%, and 18.2% year-on-year. Corresponding PE is 29.0x, 23.5x, 19.9x, and is currently actively recommended.