Merida Industry Co’s (美利達) bicycle orders have increased as governments worldwide ease coronavirus lockdowns, and its order visibility is likely to extend well into next year, KGI Securities Investment Advisory Co (凱基投顧) said.
The growth momentum for electric bicycles is likely to continue this year, which would benefit Merida’s earnings and revenue growth and boost its valuation, KGI said in a note on Tuesday last week.
Merida is a leading mid to high-end bicycle manufacturer, which distributes its products under the Specialized and Merida brands.
The company’s shipments last month increased 25.31 percent year-on-year to 105,343 units and consolidated revenue rose 7.86 percent to NT$258.21 million (US$8.71 million), it said in a statement on June 10.
Its cumulative bicycle shipments in the first five months of the year were 0.24 percent higher than a year earlier at 409,144 units, while cumulative revenue fell 5.83 percent to NT$993.43 million, it said.
“Merida’s shipments of electric bicycles would reach its target range of between 250,000 and 270,000 units this year, which is higher than our estimate of 248,000 units,” KGI analysts Angus Chuang (莊政翰) and Jenny Liu (劉昃恩) said in the note.
“With better-than-expected order visibility for 2021, e-bike shipments could hit 350,000 to 400,000 units next year, higher than our estimate of 337,000 units, given lower inventory and growing consumer preference for bicycles in the post-COVID-19 period,” they said.
KGI said that Merida’s own-brand business in China is also expected to improve this year and boost its revenue generated in China by 20 percent from last year.
“Merida’s Chinese operations are likely to return to profit this year, ending four consecutive years of declines, thanks to more orders for its own-brand bicycles and higher capacity utilization rates,” Chuang and Liu said.
KGI has set a new 12-month target price of NT$230 for Merida’s shares, up from the previous target of NT$206. The new price represents a 19.17 percent increase from its closing price of NT$193 on Wednesday in Taipei trading.
Taiwan’s stock markets are to reopen today after they were closed on Thursday and Friday for the Dragon Boat Festival holiday.
The new target price values Merida at 23 times its estimated earnings per share (EPS) next year of NT$9.99, compared with the estimated EPS of NT$7.85 for this year, KGI said.
Merida’s shareholders on Wednesday approved a proposal to distribute a cash dividend of NT$4.2 per common share, representing a payout ratio of 50.18 percent based on last year’s EPS of NT$8.37.
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