: IP commercialization drives industry restructuring, highlighting the growth potential of China's toy and card game track.

Huafu Securities released a research report stating that China's IP toy and card industry is embracing structural development opportunities. Top companies are gradually building competitive barriers by binding high-quality IP, innovating product forms, and expanding user groups of all ages. It is recommended to focus on targets such as BLOKS (00325), Card Game (unlisted), MNSO (09896), Guangbo Group Stock (002103.SZ), Cre8 Direct (Ningbo) Co., Ltd. (300703.SZ), and POP MART (09992), which benefit from the trend of IP commercialization and the outbreak of emotional consumption demand, and are expected to achieve both performance and valuation growth. Huafu Securities' main points are as follows: Toys: The development history of TOMY and Bandai shows that IP binding is the best path In the late 1990s to the early 21st century, TOMY and Bandai were still competing in popular original toys, but children-oriented original toys could not withstand the population and economic headwinds. After industry consolidation, the leading business model of Bandai has been reconstructed through deep binding with external authorized IP products, including popular children's IP toys and all-age IP interest toys/games since 2010, establishing a solid barrier. The continuous realization of "IP value maximization" in terms of performance has also led their stock prices to experience a long bull run since 2010 and a valuation increase from 15X to 20X+. Sanrio's development follows a 10-year cycle, with evergreen IP upstream and downstream synergy. The company's means of maintaining the value of its IP assets have evolved from commercial sales to IP authorization and enriching story content iteration. In recent years, under the industry + and self-revolution , it has achieved a Davis double-click. Cards: The global TCG revival is a reflection of history, and the exploration of commercialization of Chinese collectible cards reveals huge space The Japanese TCG was born in the late 1990s when the toy industry faced the triple challenge of "quantity, price, and time". The resurgence of TCG trends post-pandemic not only marks the recovery of stable core player offline social needs but also the explosion of global emotional value consumption after macro shocks. From 2015 to 2019, the Chinese TCG remained niche, with the wholesale value of TCG mainly consisting of three major card games reaching only HK$150-280 million. In 2021-2022, the Chinese card games' GMV reached RMB 9.5-12.2 billion, with the essence of the doubling being the explosion of valley-type IP collectible cards, revealing another larger IP commercialization market space. For Chinese IP commercialization companies, there is room for more optimism The market is concerned about the risk of the external authorized IP business model. The bank believes that product power + core gameplay + distribution capability are the core barriers of Card Game and BLOKS, the two top IP commercialization companies. In this round of scaling, Chinese companies are expected to have greater bargaining power in the IP field, opening up more opportunities for cooperation with high-quality popular IPs, and forming sustainable business models. The midstream of the industry chain highlights the effect of big single products, and the heads of various categories are expected to remain strong. With the explosive growth of Chinese IP toys in recent years, they have quickly become the heads of single products, forming a big single product effect where POP MART = blind boxes, Card Game = card games, and BLOKS = building blocks. Among various big single products, products with the support of top IPs and high barriers to entry in terms of product power and gameplay are relatively difficult to replicate for latecomers once they establish a brand image in consumers' minds. The rise of "Made in China" IP toys is promising. Historically, overseas IP toy leaders like Bandai were limited by price and channel constraints and did not perform outstandingly in their overseas expansions. Product exports significantly lagged behind content exports. In recent years, successful cases of localized versions of new creations like Card Game & BLOKS have revealed that localization may be the best path for external IPs to go international. With the continuous validation of product power by domestic excellent authorization brands, it is possible to expect cooperation with more high-quality IPs, expand into more high-value categories, widen the adult player base, and achieve value enhancement. There is vast space for children's IP toys and all-age IP toys. 1) Benchmarking the toy revenue generated by two major boy-targeted IPs in Japan, there is still room for more than doubling the revenue from boy-targeted IP toys in China. 2) From the perspective of relative value of content/commercialization and electronic games/toys, the future prospects of all-age IP toys are broader. Risk warning: IP authorization risk, changes in consumer sentiment and market demand.