The growth outlook for Merida Industry Co (美利達) next year is expected to be solid, as a shortage of materials has been gradually resolved this year and it has experienced steady growth in its electric bicycle sales, Jih Sun Securities Investment Consulting Co (日盛投顧) said in a note yesterday.
Electric bicycles generally have higher average selling prices and profit margins, and a higher number of shipments would result in better sales and earnings, Jih Sun said.
The brokerage has therefore raised its rating on the shares to “buy” from “hold,” with a new target price of NT$208, a valuation of as much as 23 times next year’s estimated earnings per share of NT$9.06, the research note said.
Merida shares yesterday closed unchanged at NT$175 in Taipei trading. They have advanced 26.81 percent this year.
“Merida’s third-quarter earnings were stronger than expected and the company’s business performance in the fourth quarter could be better than the seasonal pattern,” Jih Sun said in the note. “Moreover, its shipments of electric bicycles for next year are forecast to maintain high growth of 40 percent annually, although traditional bicycle shipment growth would remain weak.”
In the third quarter, Merida’s net income grew 29.45 percent year-on-year to NT$862.29 million (US$28.26 million), or earnings per share of NT$2.88, while revenue rose 10.49 percent to NT$7.82 billion.
Gross margin and operating margin also improved to 13.74 percent and 6.94 percent respectively, from 13.63 percent and 5.79 percent, company data showed.
Merida’s electric bicycle shipments are expected to reach 25,000 units a month this quarter, double the number of the same quarter last year, Jih Sun said.
With the average selling price of an electric bicycle having increased 7 percent year-on-year this year, fourth-quarter revenue is forecast to grow 20.2 percent year-on-year to NT$7.14 billion, down 8.7 percent from last quarter due to seasonal factors, the note said.
The company’s shipments of electric bicycles are forecast to increase to 230,000 units this year, up from 143,800 units last year, it said.
The shipments could grow to between 310,000 and 330,000 units next year, along with a 5 percent rise in the average selling price, which would see electric bicycles contribution to revenue account for more than 40 percent compared with about 35 percent this year, it added.
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