The toymaker's 634 million yuan profit for 2025 reversed losses in the previous four years, but its new, ultra-low-priced segment is dragging down margins

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Key Takeaways:

  • Bloks Group swung to the black last year with a profit of nearly $100 million, buoyed by overseas sales and introduction of rock-bottom-priced toys
  • Low-priced toys accounted for nearly 20% of the company's revenue just one year after the introduction of its blind box products priced at just 9.9 yuan

An impressive swing from loss to profit in the latest annual results of toymaker Bloks Group Ltd. (0325.HK) has captured investor attention, though skeptics remain. Bloks is among the world's top five character assembly and action figure toymakers, and the largest in China. But unlike Western rivals Hasbro (NASDAQ:HAS), Mattel (NASDAQ:MAT) and Lego, and domestic archrival Pop Mart (9992.HK), Blocks has no self-developed signature toy characters.

That may be a problem, as Bloks struggles with a strategy driven by copious product launches, low price points and overseas expansion, as it struggles to stay at the top of the crowded and constantly evolving global toy box. While it may be achieving scale, it lacks the brand recognition of its domestic and global peers in the $136 billion global toy market.

For now, at least, the headline numbers look good. Bloks reported its revenue rose 30% last year to 2.91 billion yuan ($423 million). It recorded a profit for the year of 634 million yuan after losing money in the previous four years, including a 398 million yuan loss in 2024. Its annual profit wasn't completely unexpected, since it previously reported a profit of 297 million yuan in the first half of the year.

Perhaps that explains why investors were underwhelmed with the full-year profit news. Bloks' shares rose as much as 12% the day after the announcement, but have given back most of that since then and were up just 4% above pre-announcement levels at Wednesday's close of HK$63.55. That's still well below the HK$85 where Bloks shares closed on their first trading in January 2025 following an IPO that raised HK$1.6 billion ($204 million).

Despite last year's strong bottom line showing, one of the biggest contributors to Bloks' move into the black wasn't related to its toy sales at all, but rather to a 78.9% decrease in administrative expenses. That item fell from 465 million yuan in 2024 to 98.1 million yuan in 2025, inflated in the earlier year by stock incentives and listing-related expenses. And we should note the company's gross margin declined by 5.8 percentage points last year from 52.6% to 46.8%, thanks to costs related to tooling for new products and slim margins for its latest line of ultra-low-priced blind box toys.

While the tooling costs reflect the company's rapid business expansion, it is treading on tricky ground with blind boxes, whose opaque packaging requires buyers to make a purchase first before finding out what's actually inside. Here, Bloks is coming late to one of the dominant market trends of the last decade. It introduced its first line of blind boxes, priced at just 9.9 yuan apiece, or about $1.50, in November 2024. Those super-low-priced products quickly took off, accounting for 18.6% of total revenue last year.

Blind boxes, closely associated with Pop Mart's much pricier collectible toys, have become huge sellers in China for at least a decade. Bloks explained its strategy of selling ultra-low-priced blind box toys as a move to cover "all demographics, all price segments, and all global consumers." But some have questioned the wisdom of such low prices, which inevitably undermine margins and could spark a price war if rivals roll out similarly cheap products.

‘Lego of China'

Bloks is sometimes called the Lego of China because it made educational building blocks for toddlers at its founding in 2014, before shifting to character assembly toys for older children in 2022. Unlike Lego, it outsources production to six partner factories, which also pressures its margins. It's aiming to change that by building its first self-run factory, due for completion this year. Also unlike Lego, it lacks brand loyalty due to lack of self-developed intellectual property (IP) – a major factor behind Pop Mart's and Lego's strong profitability.

After shifting to assembly character toys in 2022, Bloks became almost entirely dependent on licensed IP from other companies, most notably the Transformer and Ultraman franchises. Sales of licensed IP toys accounted for 76.2% of its sales last year. Out of the company's 29 commercialized IPs, only one, its Herospire line of character assembly toys, was developed in-house. And Herospire was hardly a major contributor last year, generating just 264 million yuan in sales, compared to 951 million yuan for Transformers and 815 million yuan for Ultraman.

Rivals like Pop Mart and Miniso (9896.HK; MNSO.US), through its Top Toy business, have developed their own IP and catered to China's "emotional economy" that has become an important element in the domestic toy market.

Bloks' product strategy, in contrast, is driven by a steady flow of new product launches involving different iterations of its current and newly licensed IPs. In 2025, it launched a staggering 913 new distinct products, bringing its total to 1,447. It added 23 new licensed IPs, bringing its total to 73, with additions from franchises like Disney's "Toy Story" and "Zootopia."

Bloks has also begun to cultivate overseas markets, which it largely ignored previously. Overseas revenue in 2025 rose by a factor of five to 318.9 million yuan from 64.2 million yuan in 2024. Its sales from the Americas jumped ninefold to 149.5 million yuan, accounting for about half of the total, while revenue from non-China markets in Asia, mostly Indonesia, more than tripled to 132.6 million yuan, making up most of the rest.

It distributes overseas through international retailers like Amazon, Walmart and Target, rather than selling directly to consumers, which further undermines its margins.

Taking a page from Pop Mart, the company is trying to build its own user community with the launch of its Blokees fan community app in Asia. It has also begun attending major international toy fairs. In the past few months, it has attended Toy Fair New York, as well as Spielwarenmesse, the world's biggest toy fair, in Nuremberg, Germany, earlier this year.

Bloks lacks much presence among older demographics that typically pay big premiums for collectible toys, which is reflected in the fact that it gets more than 80% of its revenue from consumers aged 6 to 16. But it's trying to move into older demographics by rolling out more higher-end collectibles ranging from 100 yuan to 200 yuan. Revenue from that segment increased from 11.4% of its total in 2024 to 16.7% last year.

Bloks' strategy of expanding in many different directions at the same time may work, at least in China's fast-moving toy market where today's hot property can quickly become yesterday's news. The 11 analysts who follow Bloks predict its sales will grow between 25% to 42% annually over the next two years. Its price to sales (P/S) ratio of 5.8 is relatively strong, way ahead of Miniso's 1.88, but just half of the red-hot Pop Mart's 11.3. Bloks' big shift from the red to the black certainly adds credibility to its aspirations to become a top player in China's massive toy box. But it may need to focus more on higher margin businesses if it hopes to stay profitable over the longer term.

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Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.