Selling 1 billion yuan in six months, Ultraman takes flight, this building block company is going public

Fixed Focus One

·2024-12-16 09:53

The road to listing for Bruokes has been more tortuous than imagined.

After months of waiting, the 'Chinese version of Lego' is one step closer to being launched.

On December 6th, the Chinese original building block brand Bruke obtained the key to going public through the IPO filing of the China Securities Regulatory Commission. After the expiration of its initial IPO prospectus submitted in May this year, on December 8th, Bruker updated its prospectus and continued to promote its listing on the main board of the Hong Kong Stock Exchange. The latest prospectus shows that Bruker's revenue exceeded 1 billion yuan in the first half of this year, with an adjusted net profit of nearly 300 million yuan.

In 2021, this company was still earning 300 million yuan annually and losing 500 million yuan. However, thanks to the support of the big IP Ultraman and its cost-effective strategy of selling for 19-22 yuan per unit, Bruker achieved a six fold increase in revenue and turned losses into profits in 2024.

If Bruker can successfully go public, it will be a great benefit for both the domestic building block race and the guzi economic race.

However, Bruco's excessive reliance on Ultraman IP, coupled with the company's betting agreement, has cast a fog over its listing prospects. In the future, whether it can further enrich its product line and expand its market while maintaining cooperation with Ultraman IP will become the key to its valuation in the capital market.

Half a year revenue of 1 billion, all thanks to Ultraman

Many people may not have heard of Bruco, but they should have seen their building block products in offline stores such as Toys R Us and Wal Mart.

Bruke was founded in 2014, initially selling traditional early education puzzle building toys such as building block tables and buckets for young children on e-commerce platforms. But this market is highly competitive, with weak brand power, relatively narrow user age groups, and average business conditions. Around 2020, blind boxes and IP became popular, and Bruck also began to transition towards building character toys (block people), encountering the "growth code" Ultraman.

The difference in form between Bruco's building block toys and building block human products

Ultraman first brought it explosive sales growth.

According to the prospectus, Bruker's initial revenue mainly came from building block toys. The turning point occurred in 2021, when Bruker officially signed a contract with the Ultraman IP licensor. In 2022, its Ultraman series products were fully launched. Subsequently, the proportion of income brought by building block people has been increasing year by year, and by the middle of this year, the proportion has approached 98%.

The reason why Building Blocks sell so well is thanks to Ultraman. The Ultraman IP alone contributed over 60% of the revenue in 2023, and by the middle of this year, it has also contributed nearly 60%.

In recent years, Ultraman's sales have continued to increase. Starting from 2022, Bruco will release new series every quarter, and the sales volume of the first quarter of product launch has increased from 140000 pieces in the first series to nearly 8 million pieces in the latest series, a 56 fold increase.

The reason why the Ultraman series has been so popular is not only due to its huge fan base, but also to its pricing strategy of cost-effectiveness. The average selling price of Bruco Ultraman products is between 19 yuan and 22 yuan per unit, which is more favorable for users to try them out.

With the increase in sales, Bruker's revenue has also risen.

From 2021 to 2023, its revenue increased from 330 million yuan to 877 million yuan, and reached 1.046 billion yuan in the first half of this year, exceeding last year's total revenue. If we roughly estimate based on the annual revenue of 2 billion, its revenue has doubled six times in four years.

Ultraman's popularity has brought stronger economies of scale and increased overall gross profit, improving the company's operating conditions. From 2021 to 2022, Bruker suffered consecutive losses, but turned losses into profits in the second half of 2023. In the first half of this year, the adjusted net profit was 292 million yuan. Bruke also saw a sharp increase in gross profit in 2023, with a year-on-year growth of 237.40% to 414 million yuan.

It can be said that Ultraman single handedly increased Bruco's revenue and improved the company's profits. However, a company's excessive reliance on one IP may not necessarily be a good thing.

In addition to Altman, Transformers, Naruto, Little Yellow Man, Baokemeng, Detective Conan, Hatsune Miku, Harry Potter and other hot external authorized IP, Bruco also contributed more than 20% of his income in the first half of this year. But the presence of its own IP, Versatile Bruco and Heroes Unlimited, is weak, with contributions of only 0.9% and 16.2% in the first half of this year.

Ultraman's revenue contribution accounts for the majority

In order to increase the attractiveness of its own IP, Bruke, like other big IPs, has also adopted the form of producing animated films to attract fans and increase the storytelling of its IP. From 2017 to April of this year, Versatile Bruco has released 214 episodes of TV anime, with the story revolving around three main characters: "Bubu", "Lulu", and "Coco". Heroes Unlimited combines well-known Chinese characters such as Sun Wukong, Nezha, Guan Yu, and Zhang Fei with mecha elements, and releases 59 short films.

However, as of mid-2024, Bruker's two proprietary IPs have approximately 5 million global fans, which is not particularly popular compared to other authorized IPs.

This means that Brooke became Ultraman and lost Ultraman.

How big can the building block business be?

Bruco wants to go public, telling the story of the "Chinese version of Lego" to the public. In its prospectus, it claims to be the world's third-largest puzzle toy company, following Bandai and LEGO. However, according to the 2023 GMV calculation, Bruker's 6.3% market share still has a significant gap compared to Lego's 39.5% and Bandai's 35.9%.

Market share of global role-playing toy companies

From the perspective of capital market performance, LEGO has not yet gone public, while Bandai is listed for trading in Tokyo, Japan. Both companies have not entered the international capital market, but their market share and revenue performance (with GMV exceeding 11 billion yuan in 2023) are good.

The two "big brothers" have supported the vast market of building block toys and also driven the popularity of the domestic building block track. In recent years, multiple players have emerged, including brands such as Enlightenment (under Keeppley) and Senbao (under Area-X) that have transformed from contract manufacturers, as well as emerging building block brands such as Bruker, Pinqi, Coincidence Building Blocks, and Wuwei, all of which have obtained financing successively. But currently, there are no domestic building block brands on the market, and the concentration of industry brands is relatively low. The annual GMV performance is also far behind Lego and Bandai.

Compared with LEGO, domestic building blocks have certain gaps in brand strength, purchasing channels, and assembly experience.

In terms of brand positioning, many domestic building blocks in the early stages wanted to take advantage of "Chinese characteristic IP" to embark on a path of differentiation.

For example, Senbao has collaborated with various Chinese cultural IPs, among which the more popular ones are aviation cultural and creative, fleet series, and wandering earth series, emphasizing national pride. In the early period of transformation in 2022, Bruco also cut into China-Chic style and oriental aesthetics, and released the building blocks of the Imperial Palace Taihe Hall and the Tiangong Space Station. However, after seeing the growth potential of Altman IP, China-Chic positioning was not mentioned in the prospectus.

Huahua, a trendy gamer, told Dingjiao One that there might be three reasons for this change: China-Chic style building block players are older and close to the trendy gamers, and their pricing is also biased towards the middle and high-end, but these players have tended to be rational in consumption in the past two years; Under the influence of China-Chic style, themes such as the Forbidden City, Journey to the West, and aerospace have become the standard configuration of building block brands, which are seriously homogeneous and can only compete for price; This type of building block has a relatively large volume, and people are likely to purchase it for assembly or collection purposes. There are also requirements for the placement area of the user's house.

Hua Hua believes that "these factors limit the ceiling of this category

However, pursuing the path of authorizing popular IP addresses is not a one-time solution. On the one hand, because these IPs are not exclusively authorized, it is easy to see the phenomenon of "everyone can buy them everywhere, recognize the IP but not the Bruco". On the other hand, there is uncertainty about whether the enterprise can continue to obtain authorization. The proportion of IP authorization fees in the overall cost has been increasing year by year, reaching 18.5% by the middle of this year.

IP authorization fees are increasing year by year

In terms of purchasing channels, LEGO focuses on experiential offline stores and also has developed online channels. In contrast, domestic building blocks rarely open offline direct stores, and most rely on entering supermarkets or trendy toy collection stores such as Kidswant. Some emerging original building block brands are more willing to plant grass and promote their products through short video channels.

For example, Pinqi once produced a popular product "Astro Boy Perspective Machine Armor", which was priced at more than 299 yuan and became popular in Little Red Book and Tiktok. During the 2021 Tmall Double 11 shopping festival, Pinqi sold 10000 sets of Astro Boy 70th Anniversary commemorative building blocks in pre-sale.

Bruker mainly relies on offline sales volume. According to the prospectus, in 2022, 2023, and the first half of 2024, offline distribution sales accounted for 48.2%, 83.6%, and 91.6% of total revenue, respectively, and these offline outlets are mainly concentrated in second - and third tier cities and below. Today, when offline channels are cold, Brooke has opened flagship stores on JD, Tmall and Tiktok online, but sales of different stores and styles are not stable enough.

Bruke's online channels account for less than 10%

The reason why domestic building blocks have not become popular is that their assembly experience needs to be improved. Several parents have expressed that although the prices are affordable, some domestic building blocks are made of hard materials with insufficient precision, causing hand pain after assembly. Some domestic building blocks not only have simple instructions, but also have poor structural stability, causing children to feel frustrated after assembly due to the "five step walk".

Huahua said that authorized IP has indeed helped some domestic building block brands achieve sales growth and product premium, but in this track, the next stage will be to compete for quality and original research and development capabilities.

From the prospectus, it can be seen that by the middle of this year, Bruker's R&D personnel accounted for about 64% of the total number of employees, of which about 84% were product development teams. But in the eyes of players, domestic building block brands still lack the original appeal like Lego. One example is the bouquet series launched by Lego in the past two years, which was immediately imitated by domestic brands.

Despite the vast prospects of the building block track, Bruker and his peers face some unavoidable challenges, and they also need to answer the question of "how far away are they from Lego".

Bruco, hurry to go public

Bruke's predecessor was Grape Technology, initially targeting educational games based on the STEAM concept, while also developing AR hardware products such as children's tablets and bracelets. Because the market is not yet mature, Bruker has been focusing on building block toys since 2017. Judging from this transformation and the layout of Ultraman IP, Bruker is actually lucky.

It is necessary to mention its founder Zhu Weisong, who is better known as the co-founder of the game company "Youzu Network". He and his partner Lynch pushed for the backdoor listing of Youzu Network in just 5 years, and then Zhu Weisong turned around to establish Grape Technology in 2014.

Zhu Weisong's grasp of IP and operation of capital enabled Bruke to obtain a total of nearly 1.8 billion yuan in three rounds of financing before going public, with investors including well-known institutions such as Junlian Capital, Source Code Capital, Gaorong Capital, and Yunfeng Fund. At the same time, Zhu Weisong also completed his exit from Youzu Network. From 2017 to 2018, Zhu Weisong reduced his holdings by more than 1 billion yuan.

The listing of Bruco in Hong Kong this time can be said to be time sensitive.

One reason is that Bruker has signed a bet with investors that if the listing cannot be completed before June 30, 2026, or if there is a serious breach or resignation of the founder, preferred shareholders can exercise their redemption rights. Based on Bruker's current cash flow, it is highly likely that they will not be able to afford the high cost of redeeming preferred shares. By the middle of this year, Bruco's cash and cash equivalents were only 554 million yuan.

Secondly, the authorization for the large IP signed by Bruker is expected to expire next year, while the authorization for Ultraman IP in China will expire in 2027. In the next 2-3 years, Bru will face pressure to renew multiple core IP licenses upon expiration. If the big IP Ultraman does not renew its contract successfully or its popularity declines by 2027, it will greatly affect Bruco's revenue performance.

Another invisible window period is that the popularity of the Xiaomi economy is gradually declining, and users and capital markets are beginning to calmly and rationally view IP players. Bruco may also face a crisis similar to the blind box craze receding after the listing of Bubble Mart.

The cash out performance of Bruker's management has also added a layer of distrust to the capital market.

In April of this year, one month before Bruker Group submitted its application to the Hong Kong Stock Exchange, Zhu Weisong transferred over 2.35 million ordinary shares of the restructured Bruker through a wholly-owned holding company, cashing out over 75 million yuan.

As early as the angel round investment in 2021, HFHI and BlueCo acquired shares of Bruco Group at a lower subscription price than other shareholders. The prospectus explains that this is because these two institutions acquired the shares held by Zhu Weisong instead of increasing capital to Bruker, through which Zhu Weisong successfully cashed out 120 million yuan.

In addition, Bruker stated in its prospectus that there are no lock up restrictions on the stocks held by Bruker investors. That is to say, once Bruco goes public, these investors can reduce their holdings of stocks at any time, cash out and leave the market.

An investor told 'Dingjiao One' that if the founder cashes out before the company submits its listing application, it may have a negative impact on the company's market trust, investor confidence, company image, internal team stability, and other aspects. If the founder cashes out before going public, it may be interpreted by the market as a lack of confidence in the company's future development, or a concern that going public is only for cashing out rather than for the company's development and expansion of financing channels, thereby affecting investors' trust in the company and its stock price performance.

Considering the generally sluggish performance of toy companies in the Hong Kong stock market, such as the P/E ratio of Caixing Toys being only 3.2 times, the P/B ratio of offline toy retailer Kaizhile being as low as 0.93, and the fact that the prospectus submitted by card company Kayou has expired for 5 months, there is still uncertainty in the market prospects of Bruker.

This article is from the WeChat official account "Dingjiaoone" (ID: dingjiaoone), written by Su Qi, edited by Wei Jia, 36 Krypton is authorized to release.

The viewpoint of this article only represents the author himself, and the 36Kr platform only provides information storage space services.

半年卖10亿、奥特曼带飞，这家积木公司要上市