Title Bicycle industry: Inventory digestion winding down; e-bikes to fuel future growth
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Title:Bicycle industry: Inventory digestion winding down; e-bikes to fuel future growth
Download File:Bicycle industry note 161227--sinopac.pdf 
 
Summary:Bicycle industry: Inventory digestion winding down; e-bikes to fuel future growth

Shimano projected last month that inventory reduction efforts in Europe and the US would wind down late this year or in 1Q17, but cautioned that demand from China would remain weak owing to high inventory levels. We concur with the demand outlook for China heading into 2017. In addition to the inventory overhang, we see China’s expanding bicycle-sharing system as a medium-term threat to bicycle makers, especially manufacturers of entry-level and midrange models.

Buy Merida Industry (9914 TT), TP of NT$163 (22x 2017F P/E): Merida has high sales exposure to Europe and the US (together about 75% of Merida’s sales), and a significant and rising exposure to electric bikes (e-bikes). Meanwhile, the bikes it sells domestically in China are high-end models.

Buy Kuei Meng International (5306 TT), TP of NT$135 (18x 2017F P/E): Bicycle sales in China account for about 50% of its sales. Since KMC focuses on making chains for bikes with less than 8 speeds, the company is expected to benefit from the emerging bike-sharing system in the short term.
  
Date:2016/12/28
Author:TaiwanResearch.com
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