Introduction to this report:
The Chinese fitness market is developing rapidly, and the online fitness market is growing faster than offline. The company relies on fitness content+sports products to provide users with one-stop solutions and is optimistic about future development.
Summary:
For the first time, coverage gave an increase in holdings rating. We forecast the company's revenue for 2023-25 to be RMB 21/2257/RMB 2,479 million, and adjusted net profit of RMB -3.59/-2.09/034 million yuan. Referring to the valuation of comparable companies in the same industry, and taking into account the company's leading position and scarcity within the industry, the company was given a target price of HK$33.5, covering the first time, a rating of increased holdings.
The domestic fitness market, especially online fitness, will grow rapidly, and the penetration rate of fitness people will increase rapidly.
1) According to Insight Consulting, the number of fitness people in China will increase from 374 million in 2022 to 464 million in 2027, with a CAGR of 4.4%; however, the penetration rate of the fitness population of 26.5% and the average annual expenditure of 2,518 yuan/person is still lower than the US and Europe, with a high room for improvement; 2) The size of China's fitness market will increase from 941.9 billion yuan in 2022 to 2.08 trillion yuan in 2027, with a CAGR of 17.2%; 3) Factors such as policy support, pursuit of a healthy lifestyle, and increased willingness to pay for fitness content will drive the rapid development of the fitness market; 4) The company ranks first in the country in terms of caliber such as MAU and number of exercises, and is expected to maintain an upward trend in share.
Private brand retail and fitness content are dual driven to create a one-stop solution. 1) The company was founded in 2014 and is committed to providing users with one-stop fitness solutions; 2) Excellent core indicators. MAU rose from 15.535 million in 2019Q1 to 32.835 million in 2023Q2, and the payment penetration rate increased from 2.4% to 10.2%; 3) Retail business (own brand sports products) accounted for about 50% of revenue, consolidated the basic market, and member subscription and online payment services accounted for about 40%. Paid events have grown strongly in recent years; 4) Revenue increased strongly in recent years; 4) Revenue increased from 663 million yuan in 2019 to 2022 At 2,212 billion yuan, the CAGR is 49.4%; 2023H1 is 985 million yuan/ -2.7%, due to factors such as the external environment, and the focus on core and optimized management, there will be a steady recovery in the future; 5) The adjusted net profit loss margin has narrowed markedly since 2022. 2023H1 is -223 million yuan, which is further narrower than the same period last year, and the profit inflection point is now approaching.
The triple core advantage creates barriers, and future development is worth looking forward to. 1) The platform has extensive, professional, personalized, and continuously updated and iterative content, forming a structured course/recorded class/live course, etc., and cooperating with top global experts such as Pamela to launch member-only courses. High-quality course content will drive the platform's appeal to continue to increase; 2) Retail business and content complement each other to form a closed business model. Smart hardware such as smart spinning bicycle/smart bracelet/KS can seamlessly connect the physical and digital fields to create an immersive, one-stop fitness experience; 3) Paid events are a joint medal business to create a new medal business Growth pole, growth rate exceeded in 2022 300%, future synergies with other businesses will increase; 4) Other benefits such as a vibrant Keeper community, experienced management team, etc.
Risk warning: supply chain risk, increased industry competition, risk of loss of users, etc.