Shuhua Sports - a leading brand that has been deeply involved in the field of fitness manufacturing for many years. The company was founded in 1996 and has built a complete “fitness equipment+display stand” business system for 20 years. In 2014, it began focusing on smart treadmills and extended to business fields such as smart outdoor routes and health data service providers to broaden business boundaries. In 2021, the company's revenue further increased to 1,562 million yuan/+5.25%, and the net profit of the mother was under pressure of 116 million yuan/ -15.45%.
Industry level - The policy strongly supports the sports industry, and national fitness demand is growing. In recent years, with central and local governments introducing relevant policies, brand internationalization, outdoor snow and ice, and “fitness +” have become key areas. Demand for home fitness also increased dramatically after the epidemic. According to Huajing data, China's fitness equipment sales revenue in 2020 was 39.52 billion yuan/+32.8%, and the 8-year compound growth rate in 2012-2020 was 3.8%. Data from the Forward-Looking Research Institute shows that compared to Europe, America and neighboring Japan, China's fitness penetration rate is only 3%, and it has broad market potential.
Competitive level - Build high-quality products and continuously strengthen channel marketing to build a brand moat: position the middle and high end, reduce product imitation while avoiding falling into price competition, and be good at seizing the trend of emerging social marketing. Self-research and collaborative research and development are equally important. The first smart treadmill was launched 1-7 years earlier than other brands; R&D expenses in 2021 continued to increase 5.3% to 35 million yuan on top of the continued high increase in previous years, and collaborative research and development with Internet companies and universities played a role in saving costs and increasing efficiency.
Investment suggestions: The size of the sports equipment market is around 30 billion yuan in 2020, and the three parties predict that smart fitness alone will reach 80 billion yuan in 2025. According to estimates, Shuhua accounts for about 5% of the local market share, higher than other national local brands, second only to leading global brands. In 2021, the company's revenue was 1,562 million yuan/ +5.25%, and the short-term pressure on the return mother's net profit was 116 million yuan/ -15.45%. We are optimistic about the long-term development of the company's business and forecast earnings per share of 0.36, 0.44 and 0.54 yuan for the next three years; PE is 27.4, 22.0 and 17.9 times, and is currently at an all-time low. First coverage, giving a “buy-A” recommendation.
Risk warning: The risk of rising costs; demand monetization results do not meet expectations; the competitive environment deteriorates; the economic downturn weakens consumption intentions and exceeds expectations.