Keep is the largest online fitness platform in China. Based on the operation of the Keep online community, it has formed a diversified monetization model of consumer goods+online payments. The company was founded in 2014 and began to gradually experiment with monetization in 2018. It has gained a large number of online users during the pandemic. Currently, the company promotes online fitness content through live streaming classes, recorded classes, etc., and also sells smart fitness equipment and supporting sports products through its own shopping malls and third-party e-commerce platforms. In 2022, the average number of monthly active users of the Keep platform was 36.4 million. Monthly active users recorded a total of about 2.1 billion workouts on the platform, making it the largest fitness platform in China.
The online fitness market is growing rapidly, and diversified content and diversified monetization systems have been formed. In 2022, the total online fitness market was 455.6 billion yuan, accounting for 48.4% of China's fitness market. It is expected to reach 128.54 billion yuan by 2027, accounting for 61.8%, with a CAGR of 23.1%. Currently, the main components of the online fitness market include fitness apps, video apps, live streaming apps, fitness video bloggers, smart fitness equipment brands and manufacturers, and sports product brands, which are channeled and further monetized through apps, live broadcasts, short videos, and graphics. Currently, the main forms of monetization include membership payments, product sales, advertising, and online distribution to offline channels.
Keep's online payments mainly consist of membership fees+additional fitness content payments. The Keep Community uses free fitness content to form an online platform and has accumulated original users. Users can obtain basic fitness content for free and participate in fitness social communities. On the Keep platform, subscription members can get online sports privileges, offline sports privileges, membership privileges, etc. Keep also provides a variety of membership options and launches joint membership programs with other platforms. In addition to basic membership, keep encouraging users to pay through live recorded courses, virtual event services, and other differentiated online paid content.
Keep further monetizing through online sales of physical products. In 2018, Keep officially launched the consumer goods business, providing users with its own brand sports products and creating new revenue growth points. The company focuses on the technology and intelligence of sports products and lays out the AIoT ecosystem. Its supporting sports products include fitness equipment, sportswear, and health food. From a channel perspective, the tripartite channel accounted for the highest share of sales in 2022, at 656 million yuan, keep its own shopping mall 230 million yuan, and wholesale channels 251 million yuan.
Profit forecasting and valuation: The company is currently in a state of loss, but is actively carrying out cost control. With further cost cuts, we believe that after listing, the company can be expected to refine its profit model, especially for fitness equipment and food with relatively heavy investment in R&D and execution. After adapting to the general environment, it is expected to achieve profits after certain phased adjustments. In the future, we judge that the company's profit elasticity will be released during the economic recovery period. The company's overall forecast for 2023-2025 is 2,098/22.34/2,470 billion yuan. Using PS valuation, it corresponds to the current 3.58/3.36/3.04x PS. The consolidated forecast for 2023-2025 is an adjusted net profit of -3.14/-1.94/178 million yuan.
Risk warning: consumption recovery falls short of expectations, user growth falls short of expectations, cost control falls short of expectations