Core Viewpoint - CICC has downgraded the net profit forecasts for 2025 and 2026 for Blok (00325) by 19% and 17% to 650 million and 870 million HKD respectively, while introducing a net profit forecast for 2027 of 1.07 billion HKD, with a target price reduction of 26% to 100 HKD, indicating a potential upside of 40% from the current price [1] Group 1: Company Current Situation - CICC conducted a company survey and engaged in in-depth discussions with management regarding strategic reviews, new product performance, and overseas expansion [2] Group 2: Focus on Key Categories in 2026 - In 2026, the company plans to focus on key categories to enhance efficiency, having previously explored business boundaries across all demographics and price points in 2025. The company aims to stabilize the new product launch rhythm and improve the success rate of individual products while controlling the proportion of low-margin products [3] Group 3: Growth Potential from Building Block Vehicles - The company has established building block vehicles as one of its two core strategic categories alongside building block figures, planning to maintain a monthly launch rhythm in 2026. The core IP operation for building block figures continues to deepen, with effective coverage across various price segments [4] Group 4: Strong Overseas Performance - The company's overseas business is expected to continue high growth, with a projected doubling in the second half of 2025. The North American market is anticipated to become the largest single overseas market in 2026, supported by pricing strategies and product strength [5]

Company Overview - The company has conducted a recent survey and engaged in in-depth discussions with management regarding strategic reviews, new product performance, and international expansion [1] - In 2025, the company plans to conduct large-scale new product launches to experiment, while in 2026, it aims to focus on trending categories to enhance performance certainty, with a continued emphasis on new product categories and international performance [1] Strategic Focus - In 2026, the company intends to concentrate on key product categories, which is expected to improve quality and efficiency. In 2025, the company explored business boundaries with a global strategy, achieving good performance in the 9.9 yuan market segment, while some categories, such as female-oriented products, did not meet internal targets, leading to resource dispersion and profit drag [1] - The company plans to stabilize the new product launch rhythm and improve the success rate of individual products, while financial maturity and stable personnel size are expected to reveal operational leverage effects [1] - The company anticipates stabilizing and recovering gross margins by controlling the proportion of low-margin products and leveraging scale effects to dilute costs [1] Product Development - The company has successfully cultivated the building block vehicle category, which is expected to drive future growth. In 2026, it plans to maintain a monthly launch rhythm for this category, which is expected to contribute positively to gross margins [1] - The core IP operation for building block figures continues to deepen, with the Transformers series effectively covering price ranges from 9.9 yuan to 249 yuan, while new SKU specifications for Ultraman stimulate demand [1] - The company’s strategy for all demographics is progressing, with an expected increase in the proportion of adult-oriented products in the second half of 2025 [1] International Expansion - The company’s overseas business is expected to continue high growth, with a projected doubling in the second half of 2025. The pricing strategy and product strength have allowed the company to maintain a price advantage despite North American tariff impacts, successfully entering mainstream channels like Walmart [2] - North America is expected to become the largest single overseas market in 2026, while the company plans to expand its presence in Southeast Asia, particularly in Thailand and Vietnam, supported by logistics and warehousing [2] - The European team is still being built, indicating significant future potential in that market [2] Financial Forecast and Valuation - Due to some new products underperforming, the company has lowered its adjusted net profit forecasts for 2025 and 2026 by 19% and 17% to 650 million yuan and 870 million yuan, respectively, and introduced a new adjusted net profit forecast of 1.07 billion yuan for 2027 [2] - The current price corresponds to 18 and 15 times the adjusted P/E for 2026 and 2027, respectively. The target price has been reduced by 26% to 100 HKD, corresponding to 26 and 20 times the adjusted P/E for 2026 and 2027, indicating a potential upside of 40% from the current price [2]

Summary of Company and Industry Insights Company: 布鲁可 (Bluco) Sales Performance - In Q2 2025, sales slightly exceeded 600 million yuan, showing significant growth compared to the same period last year, primarily due to an increase in retail outlets and accelerated distribution by dealers [1][6][3] - Sales in April 2025 were approximately 320 million yuan, while May sales slightly exceeded 500 million yuan [2][6] - Q1 2025 sales were 600 million yuan, up from 430 million yuan in Q1 2024, indicating a high year-on-year growth rate [3] Product Performance and IP Distribution - In April and May 2025, the sales distribution of major IP products was as follows: Ultraman series accounted for 50%-55%, Transformers for 15%-20%, Detective Conan and Kamen Rider each for 8%-10%, and original series also for 8%-10% [9][1] - The Ultraman series saw a decline of approximately 10 percentage points in its sales share, with the company aiming to reduce reliance on this IP and balance its business structure through other IPs [10][1] - The 14th product line performed better than expected, with a significant demand compared to the 12th and 13th lines [11][1] Pricing Strategy - The Ultraman series has a wide price range from 9.9 yuan to 39 yuan, with a trend towards higher pricing expected in the coming months, including new figurines priced between 499 to 1,299 yuan [15][1] Inventory and Market Expansion - As of early 2025, channel inventory was healthy, but increased after the launch of the Ultraman series in late April. By early June, inventory remained controllable [5][37] - The expansion of retail outlets has been slow, with a completion rate of less than 5% of the target of 250,000 new outlets for the year [38][1] Overseas Market Insights - In Q1 2025, overseas sales were approximately 80 million yuan, but dropped to over 20 million yuan in April due to tariff issues affecting the European and American markets [5][40] - The Southeast Asian market accounted for about 70% of overseas sales, while the company aims for over 500 million yuan in overseas sales for the year to alleviate domestic pressure [42][43] Challenges and Future Plans - The company faces challenges in achieving its sales targets for Q2 2025, with expectations of lower sales post Children's Day [39] - The Detective Conan series has been impacted by negative public sentiment, leading to lower-than-expected sales and potential delays in new product launches [31][32] IP Development and Consumer Trends - The company is exploring new IPs, including a partnership with 王者荣耀 (Honor of Kings), which is expected to attract a female consumer base [35][36] - Current IPs like Pokémon and Kamen Rider have shown varying performance, with Kamen Rider being less stable due to its dependency on the Ultraman ecosystem [21][22] Market Feedback and Product Improvement - Feedback collection for product improvement is conducted through order rates, online complaint data, and membership system feedback [27][24] This summary encapsulates the key insights from the conference call regarding the company's performance, product strategies, market challenges, and future directions.