Guoyuan International released a research report, initiating coverage on BLOKS (00325) with a "Buy" rating. The company has rapidly grown into a leader in its niche market through innovative product design, strong IP operational capabilities, and an omni-channel distribution network. Its business model integrates IP operations, design and R&D, manufacturing, and channel management, forming a complete value chain, with future growth potential in overseas markets deemed promising. The firm currently employs a PE valuation method. Considering the anticipated high-quality growth and overseas market expansion, it assigns the company a target valuation of 26 times 2026 earnings, corresponding to a target market capitalization of approximately HK$238 billion and a target price of HK$95.5 per share, implying an estimated upside potential of 21.1% from the current price.

The company possesses a deeply penetrated, industry-benchmark, multi-dimensional channel system. It has built a channel system that is considered an industry benchmark—deeply penetrated, highly efficient, and controllable. With over 140,000 offline retail points, its distributor network has achieved an order-of-magnitude increase in size within three years, achieving comprehensive penetration into third-tier and lower-tier cities, thus forming powerful market coverage and reach. Simultaneously, the distributor network efficiently covers all of China's first and second-tier cities and boasts a coverage rate exceeding 80% in third-tier and lower-tier cities, creating a strong brand sales matrix that can continuously and subtly influence potential consumers.

Furthermore, the company's channel types are diverse and multi-dimensional, encompassing both nationwide large-scale supermarkets and chains such as Toys "R" Us, Kidsland, Coolock, and Walmart, while also including a vast number of specialized toy stores, stationery shops, and boutique stores.

It has established industry-level quality benchmarks and extreme cost-performance, building a powerful brand barrier. With advancements in China's technological level, particularly breakthroughs in materials science, machine tools, and injection molding, the quality of Chinese toys is beginning to challenge world-leading standards. The company's rapid sales growth in recent years is closely linked to continuous improvements in its manufacturing processes; its current products can offer first-tier craftsmanship quality and assembly experience within specific price brackets. Consequently, the company's products possess the combined advantages of cost-performance, aesthetic appeal, and licensed IPs. This extreme cost-performance has constructed a strong brand barrier, supporting revenue growth that consistently outpaces the industry average.