Shuhua Sports is a leading provider of sports health solutions in China. The company's main products are fitness equipment and display shelves, has its own brand, and provides OEM/ODM contract manufacturing services for overseas brands.
The company focuses on its own brand construction, and now has a series of fitness equipment brands with clear positioning, such as "Shuhua", "Baikang" and so on. In terms of revenue, Shuhua Sports mainly focuses on the production and sales of fitness equipment, supplemented by the exhibition rack business. In 2020, the business income of fitness equipment accounted for 82.8% of the company's total revenue, which can be divided into indoor fitness equipment and outdoor path products according to the use scene, among which treadmills and strength equipment are the company's traditional advantage products.
The policy is conducive to the sustainable development of the sports industry, and there is still room for the sports and sporting goods manufacturing industry to rise in the future. In recent years, the development plans such as the outline of Building a powerful Sports country, the 14th five-year Plan and the National Fitness Program (2021 Mel 2025) have given support to many aspects of the sports industry. At the same time, the level of per capita disposable income is increasing year by year, the national fitness consciousness is gradually improved, and the sporting goods manufacturing industry is in the upper reaches of the sports industry. Demand and development prospects will also rise with the growth of sports venues services, sports training and education and other projects, and there is plenty of room for rise in the future.
The company's competitive advantage lies in: 1) to build the "Shuhua" brand for more than 20 years, and the Olympic IP helps to improve the brand. 2) the R & D team is growing, and cross-industry cooperation brings the possibility of new technology; 3) the marketing network is spread all over the country, and multi-forms and multi-channels are integrated and developed.
High development space and national policy firmly promote, the company has plenty of room for growth. The penetration rate of fitness population in China is only 4.98%, and the improvement of market penetration in the future will create a broader market space. At the same time, a number of measures have been taken to tilt resources and open the increment of market demand.
The company's revenue is growing steadily and its cash flow is good. The revenue from 2017 to 2020 was 11.3%, 11.8%, 1.38 billion yuan, respectively, an increase of 6.4%, 4.4%, 12.8%, 11.3% over the same period last year. The cash flow situation is good, and the ratio of net cash flow to net profit of operating activities in 2018-2020 is more than 1, reflecting good sales payback ability.
Investment suggestion: Shuhua Sports ploughs the fitness equipment industry and increases the brand premium for products by cultivating independent brands to break through the low gross profit model dominated by OEM/ODM. Under the background of the increasing demand of the sports industry in the future, the characteristics of cultivating independent brands, attaching importance to R & D and innovation, and high-quality customer resources will help the company to further enhance its market share. We expect the company's 21-23 year net profit to be 1.7 billion yuan. As a leading fitness equipment manufacturer in China, the independent brand is gradually developing, and the company's leading edge is expected to be further expanded in the future, giving the company a 50-fold valuation in 2022. The target market capitalization is 10.5 billion yuan, corresponding to the target price of 25.5 yuan, and the first coverage is given a "buy" rating.
Risk hint: the risk of high customer concentration in exhibition business, the risk of high accounts receivable, and the risk of fluctuation of business income in outdoor path.