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Taiwan’s Role in the Global Bicycle Market
ANALYSIS

Taiwan’s Role in the Global Bicycle Market

Taiwan
Japan
g 9921.TW m 9914.TW s 7309.TSE
Mid and Small Cap 2000
Consumer 250
Blue Chip 150
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Taiwan, a powerhouse in electronics, is silently steering a significant portion of the global bicycle market. Beyond the silicon chips and circuit boards, Taiwan is carving out a niche in a different kind of hardware: bicycles. As projections indicate a bullish turn for the bicycle market, Taiwan's role as a key player becomes even more pivotal.

Renowned for its prowess in electronics and semiconductors, Taiwan also holds an impressive 13.3% stake in the global bicycle market. Its exports in this sector reached a notable $1.6 billion, positioning it second worldwide, behind only China.

In 2022, the global bicycle market, valued at $64.6 billion, is forecasted to grow at a compound annual rate of 9.7% from 2023 to 2030. The reasons? A rising interest in bicycling for recreation and its perceived health benefits, notably in preventing obesity-related illnesses.

For investors keen on tapping into this booming sector, the Taiwan stock market offers fertile ground. A majority of publicly listed bicycle enterprises are found there, with five companies listed on the Taiwan Stock Exchange and another three on the Taipei Exchange:

Company NameExchange: TickerMarket Cap
as of Oct-6, 2023,
USD million
Giant Manufacturing Co., Ltd.TWSE:99212,183.7
Merida Industry Co., Ltd.TWSE:99141,651.9
Yusin Holding Corp.TWSE:4557152.8
Lee Chi Enterprises Company Ltd.TWSE:1517104.6
Ideal Bike CorporationTPEX:893396.7
Axman Enterprise Co., Ltd.TPEX:680467.3
Sun Race Sturmey-Archer CorporationTWSE:152664.8
Joy Industrial Co., Ltd.TPEX:455920.3

When diving deeper, Giant Manufacturing (TWSE:9921, JAKOTA Mid and Small Cap 2000 Index) and Merida Industry (TWSE:9914, JAKOTA Mid and Small Cap 2000 Index) emerge as key players for closer scrutiny. Additionally, Japan’s Shimano Inc. (TSE:7309, JAKOTA Blue Chip 150 Index, JAKOTA Consumer 250 Index), a leader in bicycle components, should be part of any comparative analysis.

Giant
Manufacturing
Merida
Industry
Shimano
Business DescriptionGiant Manufacturing Co., Ltd., together with its subsidiaries, manufactures and sells bicycles, electric bicycles, and related parts. The company offers on-road, x-road, off-road, youth, rider gear, bike gear, and service gear bicycles. Giant Manufacturing Co., Ltd. was incorporated in 1972 and is headquartered in Taichung City, Taiwan.Merida Industry Co., Ltd. manufactures and sells bicycles and components in Taiwan, China, Hong Kong, Europe, and the United States. It offers mountain bicycles, road bikes, fitness bikes, e-bikes, gravel bikes and trekking and city bikes, as well as bikes for youth and kids. Merida Industry Co., Ltd. was incorporated in 1972 and is headquartered in Changhua, Taiwan.Shimano Inc. develops, produces, and distributes bicycle components, fishing tackles, and rowing equipment. It has operations in Japan, Asia, Europe, North America, Latin America, and Oceania. Shimano Inc. was founded in 1921 and is headquartered in Sakai, Japan.
Operational indicators:
LTM Total Revenue, $mn2,788.71,116.63,946.0
LTM EBITDA, $mn265.2134.31,102.7
LTM EBITDA margin, %9.5%12.0%27.9%
LTM EBIT, $mn207125.9953.2
Trading multiples:
TEV/Total Revenues1.01.62.3
TEV/EBITDA9.615.38.3
TEV/EBIT12.916.89.7
P/Diluted EPS16.821.717.0

Operational indicators reveal that Shimano, with an EBITDA exceeding $1.1 billion, leads in operational metrics. Yet, when looking at TEV/Total Revenues ratios, Shimano surpasses the two Taiwanese firms only marginally. Interestingly, Merida Industry commands the highest TEV/EBITDA and P/EPS multiples within this trio, reflecting its premium valuation owing to consistent sales growth and a healthier balance sheet.

Merida Industry: Key financial indicators, TWD million

For the Fiscal Period Ending12 months
Dec-31-2019A
12 months
Dec-31-2020A
12 months
Dec-31-2021A
12 months
Dec-31-2022A
12 months
Dec-31-2023E
Total Revenue28,243.227,072.329,391.237,003.130,600.2
  Growth Over Prior Year9.2%(4.1%)8.6%25.9%(17.3%)
Gross Profit3,819.73,787.24,087.06,391.3
  Margin13.5%14.0%13.9%17.3%18.9%
EBITDA1,929.22,103.41,820.33,703.13,842.6
  Margin6.8%7.8%6.2%10.0%12.6%
EBIT1,710.81,884.21,589.43,437.53,508.3
  Margin6.1%7.0%5.4%9.3%11.5%
Earnings from Cont. Ops.2,501.04,112.14,788.23,454.4
  Margin8.9%15.2%16.3%9.3%
Net Income2,502.43,993.34,649.53,389.12,632.6
  Margin8.9%14.8%15.8%9.2%8.6%
Diluted EPS Excl. Extra Items8.3313.4515.4910.93
  Growth Over Prior Year46.4%59.3%16.7%(27.3%)(20.1%)

Giant Manufacturing: Key financial indicators, TWD million

For the Fiscal Period Ending12 months
Dec-31-2019A
12 months
Dec-31-2020A
12 months
Dec-31-2021A
12 months
Dec-31-2022A
12 months
Dec-31-2023E
Total Revenue63,449.570,010.881,839.992,043.781,705.2
Growth Over Prior Year5.3%10.3%16.9%12.5%(11.2%)
Gross Profit13,656.916,168.719,764.120,824.0
Margin21.5%23.1%24.1%22.6%21.0%
EBITDA6,051.38,311.010,300.09,668.37,998.9
Margin9.5%11.9%12.6%10.5%9.8%
EBIT4,732.36,858.38,709.37,914.45,854.4
Margin7.5%9.8%10.6%8.6%7.2%
Earnings from Cont. Ops.3,594.75,175.96,307.56,176.5
Margin5.7%7.4%7.7%6.7%
Net Income3,374.64,949.05,930.15,843.93,923.6
Margin5.3%7.1%7.2%6.3%4.8%
Diluted EPS Excl. Extra Items8.9513.1215.7315.149.95
Growth Over Prior Year17.9%46.6%19.9%(3.8%)(35.9%)

The years 2021 and 2022 witnessed a seismic shift in transportation preferences, largely influenced by the COVID-19 pandemic, propelling both Giant Manufacturing and Merida Industry to greater heights.

However, 2023 paints a different picture. Both companies are likely to face a double-digit drop in full-year sales. For instance, Merida’s sales in the first half of 2023 are already down by 6.6% compared to the same period in 2022. The overoptimistic ordering in 2022, in anticipation of continued high demand, led to an oversupply. Consequently, bicycle prices in 2023 have dropped.

The stock narratives for these firms reflect industry trends. A 2021 zenith in demand set the stage for current valuations, which, given the bicycle price downturn, have now slid to a three-year low.

Taiwan’s Role in the Global Bicycle Market: image 1

However, the future remains promising. The embracing of bicycling as regular exercise, the growth of the e-bike segment, and the rising trend of dockless bike-sharing systems, especially in Asian markets, suggest a brighter horizon. Looking ahead to 2024, projections indicate a resurgent sales growth trajectory for industry leaders like Giant Manufacturing, Merida Industry, and Shimano.

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