With European and US cities under lockdown due to the COVID-19 pandemic, Taiwan’s two major bicycle makers, Giant Manufacturing Co Ltd (巨大機械) and Merida Industry Co Ltd (美利達), face huge uncertainties for shipments in the short term, Yuanta Securities Investment Consulting Co (元大投顧) said last week.
“As 57 percent of Giant’s sales were generated by the EU and US markets last year, we expect shutdowns in EU and US cities this month and last month due to the COVID-19 outbreak to affect Giant’s sales and gross margin in the first half of this year,” Yuanta analyst Peggy Shih (施姵帆) said in a note on Tuesday.
“Additionally, the increasing inventory of this year’s bike models in the first half of the year would likely defer shipments of next year’s models to the second half this year,” Shih said.
As for Merida, “up to 81 percent of its sales for last year were from EU and US markets, higher than Giant’s 57 percent, and these markets are likely to see greater impact from COVID-19 due to city shutdowns in the short term,” Shih said in a separate note on Wednesday.
Up to 70 percent of Giant’s manufacturing capacity is in China, and as its work resumption rate there last month recovered to as high as 90 percent, it faces no materials or logistical issues, Shih said.
In comparison, Merida might face a component shortage issue due to virus-related disruptions in Japan and ASEAN markets, she said.
Based on Yuanta’s estimates, Giant’s revenue for this year is forecast to decline 7.2 percent year-on-year to NT$58.89 billion (US$1.94 billion), and its gross margin could fall to 20.9 percent, from 21.5 percent a year earlier, while Merida’s revenue might drop 5.6 percent to NT$26.68 billion and gross margin could fall to 12.9 percent, from 13.2 percent last year.
Last year, Giant shipped 4.16 million bicycles, down 4 percent from a year earlier.
Despite an 11 percent annual decline in traditional bike shipments to EU and US markets, it posted stable shipments to China, while electric bicycle shipments grew 15 percent, Yuanta said.
Merida’s shipments last year fell 19 percent to 1.05 million units, with a 38 percent decline in traditional bike shipments to the EU and the US, but shipments to China grew 11 percent and electric bicycle shipments increased 63 percent, Yuanta added.
Last week, Giant’s board of directors approved a proposed cash dividend distribution of NT$4.6 per share, after the company reported the highest earnings per share of NT$9 in four years, with a payout ratio of 51.11 percent.
Net income rose 17.8 percent year-on-year to NT$3.37 billion last year and consolidated revenue grew 5.3 percent to NT$63.45 billion, company data showed.
Merida also approved a proposed cash dividend distribution of NT$4.2 per share, based on last year’s earnings per share of NT$8.37, also its highest in four years, which suggests a payout ratio of 50.18 percent.
Its net income last year increased 46.44 percent to NT$2.5 billion, while revenue rose 9.2 percent to NT$28.24 billion, the company’s financial statement showed.
Shares in Giant and Merida this year have declined 38.26 percent and 37.68 percent to NT$131.5 and NT$110 respectively, as of Wednesday last week.
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