Credit Suisse lowers BLOKS target price to 97 yuan, maintains "Buy" rating

Futu Securities published a research report indicating that BLOKS (00325.HK) is expected to have a weaker-than-expected recovery momentum in the second half of 2025. This is due to a slowdown in the company's product launch pace and an increase in the proportion of low-priced products. As a result, they have lowered their sales and profit forecasts, although sales volume growth is expected to remain strong.

The firm has reduced its earnings estimates for BLOKS for 2025, 2026, and 2027 by 14%, 23%, and 26% respectively, and revenue forecasts by 14%, 18%, and 21%. The target price has been lowered from HKD 128 to HKD 97, maintaining a "Buy" rating. The firm believes that the company's sales momentum continues to improve, with a compound annual growth rate of net profit reaching 22% between 2022 and 2027, making the valuation attractive.

Futu expects that further development of vehicle toy products under BLOKS will drive incremental sales, and the company's gross profit margin is anticipated to rebound in the second half of 2026. With the company adopting a more focused recruitment strategy and signing new IPs, it is expected that the ratio of sales, general, and administrative expenses will improve moderately