• 2H26 results exceeded our expectations, with revenue up 44.3% YoY to RMB386.8mn and net income increased 29.9% YoY to RMB45.4mn, driven by higher sales volume in both the fresh sweet potato and processed products segments. FY26 revenue/PATMI were at 104%/123% of our forecasts.
• Earnings from the fresh sweet potato segment doubled, driven by a c.30% YoY surge in sales volume, while processed products grew 12.5% YoY, supported by portfolio expansions including sweet potato chips and steamed products. Overall gross margin declined by 330 bps to 31.2% due to margin compression in the fresh segment.
• We maintain our BUY recommendation and raise our target price to S$0.06 as we roll into the new financial year. We raise our FY27e revenue and net profit forecasts by 23% and 29%, respectively, and expect earnings to grow 24% YoY. Growth will be driven by the continued expansion of Zixin’s white-label ODM business, supported by customer additions across major Chinese snack brands, supermarket private-label brands, and international markets. Meanwhile, demand for fresh sweet potatoes is expected to remain robust, supported by increasing health-conscious consumption and strong demand for premium varieties such as Hong Yao and Black Gold, which offer quality comparable to Japanese sweet potatoes at a more competitive price.

• 2Q26 revenue/adj. PATMI met our expectations at 50%/51% of our FY26e forecast. Growth is driven mainly by the Adobe Creative Cloud Pro (CC Pro) deal, with Creative freemium monthly active users (MAU) growing 70% YoY to over 90mn.
• Adobe sticks to its freemium strategy, “traction first, monetisation later.” We expect strong MAU and generative credit growth, while ARR remains flat. FY26E subscription ARR guidance is unchanged at 10.2% (vs. 11.5% in FY25). The shift to acquiring more freemium users via Acrobat and Firefly weighs on 2H26e ARR growth, with monetisation expected to improve as users convert after free trials and hit the paywall. Monetisation will be driven by 1) Upselling to higher pricing tier CC Pro during renewal cycle, 2) Firefly and AI Acrobat SKUs scaling to US$1bn ARR in the near term (>US$500mn in 2Q26), and 3) More Generative credit consumed for advanced media types and AI model.
• We maintain a BUY recommendation with a higher DCF target price of US$385 (prev. US$368). We raised FY26e revenue est. by 2% after the full-year guidance increase, but cut adj. PATMI by 3% due to higher-than-expected mainly G&A and income tax expenses. WACC and terminal growth remained unchanged at 7.9% and 2%, respectively. The company is now trading at a significant discount. Adobe is trading at 11.5x our FY26e GAAP P/E, below its 1-year average of 18x. Our target price implies a P/E of 21.4x, which is a 29% discount to peers’ 27.6x. While generative AI competition adds pressure, we still expect resilience driven by safe IP, enterprise demand for end-to-end tools, and Firefly’s LLM integrations.

Overview BLOKS is a leader in China’s assembly character toys market. The company holds over 500 patents, possesses original IP capabilities, and has non-exclusive licenses for approximately 50 well-known IPs. Its product positioning is “high quality at a reasonable price.” Leveraging its product strength and supply chain advantages, BLOKS maintains cost competitiveness while continuously expanding its product categories. The company has established a multi-channel sales network, and since 2022, has primarily focused on offline channels centered on distributors. According to...
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