Citi: The subsequent trends of China's IP toy sector will diverge, with a preference for POP MART (09992) and BLOKS (00325).

Citi released a research report stating that BLOKS (00325) has had its earnings forecast upgraded following its performance in the first half of 2026, due to better-than-expected overseas expansion and profit margins. In contrast, POP MART (09992) and MNSO (09896) (MNSO.US) have had their earnings forecasts downgraded due to weakening overseas momentum and pressure on profit margins. Given the low expectations for the second half of 2026 and a high baseline, investors are more focused on whether POP MART will show sequential improvement after the baseline reset. The bank expects sequential improvement in the fourth quarter of 2026, driven by seasonal factors and the gradual effectiveness of organizational initiatives. The bank believes that BLOKS' trajectory towards its growth target for 2026 is clearer, with successful overseas expansion, new categories, and diversification of IP taking effect; whereas MNSO still needs time to sort out the profitability model for its overseas and TOP TOY businesses, with profitability visibility also being a concern due to the slowdown. Within the sector, Citi prefers companies with strong proprietary IP operational capabilities that can create sustainable value, with the preference order being "Buy" for POP MART, "Buy" for BLOKS, and "Neutral" for MNSO. The bank forecasts that POP MART will return to growth in 2027, driven by a diversified IP portfolio, maintaining a target price of HKD 198 and a "Buy" rating. The target price for BLOKS is HKD 82 with a "Buy" rating; MNSO's target price is HKD 22.2 for HK stocks and USD 11.3 for US stocks, with a "Neutral" rating.