Bloks files for IPO

One of China’s top toymakers has filed for a Hong Kong IPO, posting explosive growth as it pivots from educational products for toddlers to collectibles for kids and teens

Key Takeaways:

  • Shanghai-based Bloks Group hopes to attract investors to its Hong Kong IPO with soaring revenue following its recent pivot to cheap assembly character toys
  • With GMV up 170% in 2023 and revenue more than tripling in this year’s first quarter, Bloks calls itself “the fastest-growing toy company of scale in the world”


By Edith Terry

Once their favorite playground, international toymakers have been scaling back their manufacturing in China lately, worried about rising costs and growing U.S.-China tensions. But the timing looks better for China’s own domestic toy market, where character toys and collectibles are hitting a sweet spot as consumers look for affordable fun during increasingly uncertain times.

Shanghai-based Bloks Group Ltd. is trying to ride the domestic toy market’s rise with a Hong Kong IPO, filing its preliminary prospectus on May 17. Worth an estimated 7.2 billion yuan ($1 billion) at the time of its latest share transaction, the company could raise over $300 million from the listing, according to financial publication IFR. That’s more than just fun and games for founder Zhu Weisong, who holds nearly 60% of the company’s shares.

Such a sum could make the company the new “top kid on the block” in Hong Kong’s IPO market, which has been anemic this year. The largest new listing to date has come from bubble tea maker Sichuan Baicha Baidao (2555.HK), also known as ChaPanda, which raised $332 million last month.

Blok’s would also be Hong Kong’s biggest new toy listing since Pop Mart International (9992.HK) raised $676 million in its Hong Kong IPO during headier times for the market back in December 2020. Bloks is much smaller than Pop Mart in revenue terms, with revenue of 876.7 million yuan in 2023, compared to 6.3 billion yuan for Pop Mart. But Bloks is king of the hill when it comes to growth, with its revenue tripling last year, compared to Pop Mart’s smaller but still-respectable 37% growth.

Bloks is mostly a “made in China, for China” story right now, although it holds licenses for Transformer toys from Hasbro (HAS.US) in over 50 countries globally through 2028. Exports account for a tiny piece of its business, worth just 8.3 million yuan in 2023, or less than 1% of its total. The company hopes to expand its global footprint using the IPO funds, among other things, with overseas revenue up by 76.5% to 5.9 million yuan in the first three months of 2024.

The first quarter also saw the company post its first profit in the three-year period covered by the preliminary prospectus. It earned 46.7 million yuan for the period, against a loss of 125 million yuan a year earlier. It recorded steep losses in each of the three previous years. Its revenue in the first quarter jumped to 465.5 million yuan from 143.7 million yuan a year earlier. Its gross merchandise volume (GMV) grew 170% last year to 1.7 billion yuan, leading Bloks to declare itself the “fastest growing toy company of scale in the world.”

Assembly character toy giant

Its GMV growth also made Bloks the largest toymaker in China and the third largest in the world for assembly character toys, according to third-party research in the preliminary prospectus. That segment of the toy market, consisting of figurines like Ultraman and Transformers, with multiple pieces that need to be assembled, grew by 52% between 2019 to 2023, to 176.5 billion yuan in GMV last year. The broader global toy market grew by less than half that rate, by 22%, to 773 billion yuan of GMV. The company is the leader in its field in China with 30.3% of the market, ahead of Bandai Namco (7832.J), owner of the Pac-man franchise, with 20%; and Danish toymaker Lego, with 14.8%.

So, what has Bloks figured out about the domestic Chinese toy market and what makes it tick?

Zhu Weisong founded his company in 2014, five years after founding Shenzhen listed Yoozoo Interactive (002174.SZ), a mobile and web game company with 1.6 billion yuan in revenues last year. He targeted doting mothers when he initially set up his company as a maker of Lego-like educational toys for tots, and became known in the industry as “Block Man” possibly because of his products’ resemblance to Lego’s famous building blocks.

Zhu sensed a new opportunity in 2022, when he started shifting his focus to toys for children and teenagers aged 6 to 16. He licensed classic IP such as Ultraman, Pokémon, Marvel’s Spidey, Sanrio’s Hello Kitty and Transformers for use in assembly character toys. As of 2023, Bloks had 130 items for sale for children under the age of 6, another 243 for ages six to 16, and 18 for people over 16, mostly from the Transformers and Ultraman series. Most of Bloks’ revenue comes from toys based on licensed IP, with such products accounting for 84.2% of its total in the first three months of 2024.

Its original line of Lego-like, brick-based toys has shrunk in revenue terms, from 321.6 million yuan in 2021, when it accounted for most of the company’s revenue, to 106.2 million yuan in 2023, when it made up just 12%. Meantime, its assembly character toys have taken flight. Revenue from those increased from 74.7% of its total in the first three months of 2023 to 97.4% in the same period in 2024, with unit sales growth even higher – rising from 4.8 million units to 24 million units over that period.

What’s driving the rapid rise of its newfound success in assembly character toys is a matter of interpretation. But cheap fun might be one explanation, especially as Chinese consumers tighten their belts and spend less on toys for both themselves and their kids. Bloks version of Ultraman costs half the amount of Bandai’s Ultraman on Tmall, according to a Chinese media report. Bloks’ prospectus also notes that its products are “extremely cost-effective” and that its mass market products average 39 yuan apiece, or less than $6, while its “affordable” products average even less at 19.9 yuan each.

Bloks is also noteworthy for its turn away from e-commerce that coincides with the launch of its assembly character toys. Its online channel sales dropped from 52% of its total in 2021 to just 6.7% in the first three months of 2024. Its use of offline distributors moved in the opposite direction, rising to 91% of its revenue in the first three months of this year from 34.2% in 2021. That appears to show there’s still plenty of money being spent in traditional brick-and-mortar toy stores.

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