Citi has released a research report fine-tuning its earnings forecasts for BLOKS (00325), primarily reflecting accelerated overseas revenue growth and improved operating expense efficiency driving margin enhancements. The target price has been raised from HK$71 to HK$82, with a "Buy" rating maintained.

BLOKS' solid first-half performance is expected to bolster market confidence in its full-year revenue growth target of approximately 30%. The company's destocking measures implemented since the second half of 2025 have proven effective, with channel inventory now at healthier levels. Channel expansion has shifted from quantity to quality, focusing on upgrading and renovating POS locations, with an emphasis on youth-oriented trend toy stores and high-efficiency outlets.

Citi believes that BLOKS' overseas expansion, new categories (such as assembly vehicles and adult player-focused products), and IP diversification initiatives should continue to support sustainable growth from the second half of 2026 onward. This is coupled with improved operating leverage and gross margin recovery as scale increases. Citi anticipates gross margins will gradually improve in the second half of 2026, driven by increased assembly vehicle production capacity and a more stable sales mix for the 9.9 yuan products, though amortization from overseas and new product lines will still require time to digest.