Rating: BUY* (Initiation)
Target price: RMB25.50
Share price (6 Sep): RMB23.55
Market Cap (RMBm): 8,810.2
Up/downside: 8.3%
From a low-margin OEM/ODM-based model, Shuhua Sports made a breakthrough by developing house brand products that have increased its brand premium. We believe that future demand growth would propel its house brands, along with an R&D and innovations focus and quality customer resources, and help the company increase market share. We initiate coverage with a BUY call and a target price of RMB25.50.
A leading provider of sports and health solutions in China
Its main products are fitness equipment and display racks under its own brands as well as OEM/ODM services for overseas brands. Shuhua is building up its own brands. Its fitness equipment brands, including Shuhua and Bokang, have clear market positioning. In revenue terms, Shuhua focuses on the production and sale of fitness equipment, supplemented by display racks. In 2020, fitness equipment revenue accounted for 82.8% of total revenue. Application scenarios comprise indoor fitness equipment and outdoor products, including treadmills and strength-training equipment.
Policy favors sports industry growth; potential room for product manufacturing
In recent years, China’s Sports Power Construction Program, 14th Five-Year Plan, National Fitness Program 2021-25 and other planning initiatives have supported the development of multiple sports industry segments. Levels of per-capita disposable income and national fitness awareness are both increasing gradually, which benefits the upstream sports goods manufacturing industry. Demand and development prospects would also rise, along with growth in sports stadium services, sports training and so on.
Shuhai’s core competitive advantages
1) The Shuhua brand is a strong one empowered further by the company’s Olympics IP.
2) Its R&D team continues to grow and cross-industry cooperation has brought new technology possibilities.
3) It has a country-wide marketing network, which integrates the development of multiple forms and channels.
Shuhua benefits from enormous industry potential due to national policies
Market: The fitness business penetration of the Chinese population is only 4.98%; an increase in penetration in the future would increase market potential. Simultaneous policy measures would also tilt resources toward new incremental market demand.
Company: Shuhua’s revenue has grown steadily with good cash flow. 2017/18/19/20 revenue were RMB1.13bn/1.18bn/ 1.33bn/1.48bn, up 6.4/4.4/12.8/11.3% yoy. The ratio of net cash flow from operating activities to net profit in 2018-20 was greater than 1, reflecting good sales payment collection capability.
Valuation and risks
From a low-margin OEM/ODM-based model, Shuhua Sports made a breakthrough by developing house brand products that have increased its brand premium. We believe that future demand growth would drive its house brands, R&D and innovations focus, and quality customer resources to help the company increase market share. We expect net profit of RMB170m/210m/240m in 2021/22/23E. We are optimistic about Shuhua’s future potential as a leading fitness equipment manufacturer and assign a 50x PE with a corresponding target market cap of RMB10.5bn in 2022E. We initiate coverage with a BUY rating and a target price of RMB25.50. Risks include: high customer concentration risk in the display rack segment; accounts receivable risks; and revenue fluctuations in the outdoor sports segment.
* Note: The investment ratings given by TFI Asset Management Limited may have taken reference to the research report previously issued by other entities of the TF Group. For details, please contact us at research_tfi@tfisec.com.
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評級：買入*(啟動)
目標價：25.50元人民幣
股價(9月6日)：23.55元人民幣
市值(人民幣)：8810.2
上漲/下跌：8.3%
舒華體育從低利潤率的OEM/ODM模式取得突破，開發了增加品牌溢價的自有品牌產品。我們相信，未來的需求增長將推動其自有品牌，以及研發和創新的重點以及高質量的客户資源，並幫助公司增加市場份額。我們以買入通知和目標價格25.50元人民幣開始承保。
中國領先的體育和健康解決方案提供商
其主要產品是自主品牌的健身器材和展示架，以及為海外品牌提供的OEM/ODM服務。舒華正在打造自己的品牌。它的健身器材品牌，包括舒華和博康，都有明確的市場定位。在收入方面，舒華專注於健身器材的生產和銷售，並輔之以陳列架。2020年，健身器材收入佔總收入的82.8%。應用場景包括室內健身設備和户外產品，包括跑步機和力量訓練設備。
政策利好體育產業發展；產品製造潛在空間
近年來，中國的體育強國建設規劃、十四五規劃、全民健身計劃2021-25年等規劃舉措支持了多個體育產業細分市場的發展。人均可支配收入水平和全民健身意識都在逐步提高，這有利於上游體育用品製造業。隨着體育場館服務和體育訓練等的增長，需求和發展前景也會上升。
蜀海的核心競爭優勢
1) 舒華品牌是一個強大的品牌，該公司的奧運IP進一步增強了這個品牌的實力。
2)它的研發團隊不斷壯大，跨行業合作帶來了新的技術可能性。
3)它擁有覆蓋全國的營銷網絡，集多種形式和渠道的發展為一體。
舒華受益於國家政策帶來的巨大產業潛力
市場：中國人口的健身業務滲透率只有4.98%；未來滲透率的提高將增加市場潛力。同時的政策措施還將使資源向新的增量市場需求傾斜。
公司：舒華的收入穩步增長，現金流良好。2017/18/19/20營收11.3億元/11.8億/13.3億/14.8億元，同比增長6.4/4.4/12.8/11.3%。2018-20年經營活動淨現金流與淨利潤之比大於1，反映銷售收款能力良好。
估值和風險
舒華體育從低利潤率的OEM/ODM模式取得突破，開發了增加品牌溢價的自有品牌產品。我們相信，未來的需求增長將推動其自主品牌、研發和創新的重點，以及優質的客户資源，以幫助公司增加市場份額。我們預計2021/22/23年度淨利潤為1.7億元人民幣/2.1億元/2.4億元人民幣。我們看好舒華作為領先健身器材製造商的未來潛力，並將2022年的市盈率定為50倍，相應的目標市值為105億元人民幣。我們開始承保，評級為買入，目標價為25.50元人民幣。風險包括：展示架部分客户高度集中的風險；應收賬款風險；户外運動部分的收入波動。
*注：TFI Asset Management Limited給予的投資評級可能參考了TF集團其他實體此前發佈的研究報告。有關詳細信息，請發送電子郵件至Research_tfi@tfaec.com與我們聯繫。
免責聲明(DISCLAIMER):
此文件僅發給指定收件人或機構。其內容可能包含某種享有法律特權或者需要保密的信息。對於任何未經本公司授權而對本文件所載內容進行使用、披露、分發、變更之行為及由此產生的後果，天風國際證券集團有限公司及其聯屬公司和附屬公司（「天風集團」）概不承擔任何責任。如您並非此文件的指定收件人或機構，請立即通知天風集團，並立即銷燬此文件。謝謝合作。
This message is intended only for the individual or entity to which it is addressed. It may contain legally privileged and/or confidential information. TF International Securities Group Limited and its affiliates and subsidiaries (「TF Group」) does not accept liability for the unauthorized use, disclosure, distribution and/or alteration of any information it contains or the consequences thereof. If you are not an intended recipient, please inform TF Group and destroy this message immediately. Thank you.
