Shares in the nation’s leading manufacturers of bicycles have far outperformed the broader market over the past 12 months, mainly because of their rapid expansion into emerging markets, in particular China.
Merida Industry Co (美利達), the nation’s No. 2 bicycle maker, has seen its shares rise 77.78 percent in the past 12 months, while those of Giant Manufacturing Co (巨大機械), the world’s largest producer of bicycles, have risen 17.99 percent over the same period.
In comparison, the benchmark TAIEX has declined 2.19 percent in the past 12 months, Taiwan Stock Exchange data showed.
Terry Liu (劉向晴), an analyst on Fubon Securities Co’s (富邦證券) equity research team, said yesterday that the two companies have benefited from stable demand for their higher-priced bikes in advanced markets, such as the US and Europe, as well as robust demand in China.
“Their capacity expansion in China is actually targeting demand for higher-priced bikes,” Liu said in a research note, adding that sales would grow by a double digit percentage in the next two years, driven by an uptick in both shipments and average selling prices.
Fubon Securities said the introduction of higher-specification bicycles at the Taipei International Cycle Show, which runs until Saturday, would present a “near-term catalyst” for the two bike manufacturers’ shares.
The brokerage house forecast the shares would continue to outpace the TAIEX this year mainly due to stable demand in the upcoming high season and secular sector growth in the long term.
Merida has said that its Jiansu plant in China would start operations in the fourth quarter of this year, which Fubon estimated would eventually expand its annual capacity from 200,000 units to 2 million.
“In addition, the product line at the plant will be 60 percent for the domestic [Chinese] market and 40 percent for exports, which we believe will help the company weather the impact of seasonality by allocating its human resources and equipment more effectively, making earnings less volatile across the quarters,” Liu said.
Sales at Changhua Couty-based Merida expanded 13.3 percent year-on-year to NT$3.34 billion in the first two months of the year, from NT$2.95 billion a year ago, while Giant, based in Greater Taichung, saw its revenue increase 3.42 percent to NT$8.11 billion in the January-to-February period, from NT$7.84 billion a year ago, the companies said in separate stock exchange filings earlier this month.
Fubon placed an “add” rating on Merida’s shares and raised its target price to NT$195 from NT$130. The brokerage maintained its “neutral” rating on Giant shares, but increased its target price to NT$182 from NT$165.5.
In Taipei trading yesterday, Merida shares closed 0.59 percent lower at NT$168, while Giant shares were down 0.91 percent at NT$164.