Capital Investment Management Corp (群益投顧) retained its “neutral” rating on Merida Industry Co (美利達), as macroeconomic factors dampen sales in China and the global bicycle industry enters a traditional low season.
Merida’s shipments to China last year declined by 28 percent annually to 720,000 bicycles, plummeting from the 1 million bicycles it shipped to the country in 2014, Capital Investment Management said in a note to clients published on Thursday.
This year, shipments to China are forecast to fall by a further 16.6 percent annually to 600,000 units, with shipments to the EU dropping 6.6 percent annually to 620,000 units and to North America by 4 percent annually to 480,000 units, the note said.
“Fortunately, consumers still favor relatively high-end bicycles, and the company is expected to benefit from a rise in average selling prices, slightly offsetting the pressure of decelerating shipments,” the report said.
Gross margin and operating margin are expected to stay flat at 17.71 percent and 10.31 percent year-on-year respectively, the report said.
In addition, Japan’s Shimano Inc, a leading bicycle parts maker commanding 70 percent of the global market for gears, reported slowing sales and inventory growth in the third quarter of last year, the report said.
Shimano’s revenue and inventory figures — which saw a 40 percent and a 30 percent rise in the second quarter of last year respectively — both dipped to less than 10 percent in the third quarter of last year, the report said.
“As Shimano has entered into a cycle of inventory digestion, business outlook for the industry might be more sluggish this year than last year,” the note said, adding that the Japanese company’s performance is considered an indicator for the global bicycle industry.
A bicycle is made up of nearly 2,000 major and minor components, which include the raw materials that represent 90 percent of manufacturing costs, the report said.
For this year, Capital Investment Management expects Merida’s revenue to dip 4.04 percent year-on-year to NT$26.97 billion (US$801.01 million), and net income to recede 5.16 percent annually to NT$2.99 billion, or earnings per share of NT$10.01.
Merida’s net income is expected to have shrunk 5.7 percent annually to NT$3.16 billion last year, according to Capital Investment Management’s estimates.
Merida’s revenues rose 3.22 percent to NT$28.1 billion last year, according to the company’s filing with the Taiwan Stock Exchange last month.
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