Bicycle
Shifting trends in the bicycle market
Overweight (Initiate)
Industry Report
June 30, 2015
Daewoo Securities Co., Ltd.
[IT Mid-Small Cap]
Will Lee
+822-768-4168
will.lee@dwsec.com
Chuljoong Kim
+822-768-4162
chuljoong.kim@dwsec.com
The sustainable growth trajectory of the bicycle market
Total bicycle sales in Korea reached roughly 1.93mn units in 2014, growing at a CAGR of
2.1% over the previous five years (since 2009). By revenue, the market expanded 7.3%
CAGR to around W513bn during the same period. This underscores that market growth
has been driven more by price than by volume. We believe Korea’s bicycle market
remains underpenetrated at 29%, far lower than the 60-80% penetration rates seen in
Europe and Japan. Hence, we see potential for long-term sustainable growth, backed by
increasing domestic penetration and entry into export markets.
Major changes in market trends
1) The primary users of bicycles are shifting from teenagers to more financially capable
people in their thirties or older. Consequently, the main product group is moving from
low-end bikes to higher-end ones. The resulting rise in prices has become the key driver
of overall market growth.
2) Domestic bicycle manufacturers are diversifying their product portfolios beyond
standard bicycles to tricycle strollers, electric bikes, and equipment and accessories.
3) In line with market growth and shifting trends, the government is expected to
continue introducing supportive policies, including the development of related
infrastructure.
Initiate with Overweight; Top pick is Samchuly Bicycle
We initiate coverage on the bicycle industry with an Overweight recommendation. We
present market leader Samchuly Bicycle as our top pick, given its trend-setting
leadership and dominant market position. We recommend watching no. 2 industry
player Alton Sports, which has its own manufacturing plant and is seeking growth
through exports. We also highlight Very Good Leisure, which is likely to see earnings
improvements on the back of the leisure business’s growth.
Combined operating profit and market cap of the three major domestic bicycle
companies (Samchuly Bicycle, Alton Sports, and Very Good Leisure)
Source: Company data, WiseFn, KDB Daewoo Securities Research
Analysts who prepared this report are registered as research analysts in Korea but not in any other jurisdiction, including the U.S.
PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.
Bicycle
June 30, 2015
I. Domestic bicycle industry
Market characteristics
The bicycle industry is largely divided into finished products and parts production. A bicycle
comprises around 300 parts and components, which bike producers assemble to make finished
products. As parts and components are the major determinant of bike quality, core components
makers hold a high status within the industry’s value chain relative to other manufacturing
industries.
Among the key components, transmissions, handles, gears, and frames are mostly standardized,
and thus mass production makes good economic sense. As such, specialized producers exist in
each of these components. For finished bike producers, the ability to procure quality parts and
ensure stable production is a key determinant of competitiveness.
Broadly, finished bike producers are classified as either manufacturers or distributors.
Manufacturers have their own distribution channels, and some even design/produce components.
Their product lineups include bikes designed for various purposes, including recreation/leisure,
mountain biking, and city riding. Distributors, meanwhile, assemble imported components into
finished bikes or import/distribute finished bikes. They tend to be smaller in size than
manufacturers, and mostly handle low/mid-priced city bikes.
In Korea, finished bike producers consist mostly of wholesalers, i.e., distributors. Parts are
manufactured in countries like China where labor and production costs are low, and then
assembled in Korea (OEM system).
The bicycle industry displays a strong seasonal pattern. The period from March to October is
traditionally the peak season, as good weather lends itself to outdoor activity. In Korea, the best
time for outdoor activity is between April and June (2Q), with bicycle sales surging around the
Children’s Day holiday.
Bicycles are widely viewed as an eco-friendly alternative mode of transportation, and
governments around the world are promoting their use to help ease air pollution and traffic
congestion. As such, bicycle demand is likely to trend up over the long run.
Figure 1. Bicycle components
Source: JimLangley.net, KDB Daewoo Securities Research
KDB Daewoo Securities Research
2
Bicycle
June 30, 2015
Domestic bicycle market continues to grow
According to the Korea Customs Service, total bicycle sales in Korea reached roughly 1.93mn
units in 2014, growing at a CAGR of 2.1% over the previous five years (since 2009). Meanwhile,
revenue expanded at a healthier pace over the same period (at a CAGR of 7.3%), hitting roughly
W513bn in 2014.
Bicycle unit sales are increasing at a modest pace of around 2-5% per year, but revenue growth
has averaged around 7%, indicating that market growth has been driven more by price than by
volume.
In 2015, we expect the domestic bicycle market to expand to 2mn units, up 4% YoY. In terms of
revenue, the market is projected to grow 7% YoY to roughly W550bn, with price still driving
market expansion.
In 2014, bicycle sales worldwide stood at 120mn units, including 28mn in Europe, 24mn in China,
14mn in North America, 11mn in Southeast Asia, and 9mn in Japan.
We believe Korea’s bicycle market remains underpenetrated at 29%, far lower than the
penetration rates in the Netherlands (98%), Germany (87%), and Japan (67%). And Korea’s share
in the global bicycle market is a meager 2%. This means there is ample room for sustainable
growth over the long term, backed by increasing domestic penetration and entry into export
markets.
Figure 2. Domestic bicycle market size (based on volume)
('000 units)
2,500
(%)
15
Domestic market size (L)
YoY (R)
1,929
2,000
1,704
1,733
1,777
1,749
Figure 3. Domestic bicycle market size (based on revenue)
2,000
1,747
(Wbn)
600
13
458.1
10
8
1,500
2009 - 2014 CAGR: 7.3%
550.0
512.7
472.9
Domestic market size (L)
YoY (R)
15
396.1
400
335.4
339.2
10
5
1,000
3
200
5
0
500
(%)
20
-3
0
-5
09
10
11
12
13
14
0
0
15F
09
10
11
12
13
14
15F
Source: Korea Customs Service, KDB Daewoo Securities Research
Source: Samchuly, KDB Daewoo Securities Research
Figure 4. Bicycle penetration rate in Korea vs. overseas
Figure 5. Bicycle penetration rate trend in Korea
(%)
('000 units)
Netherlands
98%
20,000
35
Units (L)
Penetration rate (R)
15,000
Germany
87%
18.6
19.9
21.2
29.3
22.5
24.0
25.7
27.4
30
25
20
10,000
Japan
15
67%
10
5,000
Korea
5
29%
0
0%
20%
40%
60%
80%
Source: Shimano, Samchuly, KDB Daewoo Securities Research
100%
0
07
08
09
10
11
12
13
14
Source: Korea Customs Service, KDB Daewoo Securities Research
KDB Daewoo Securities Research
3
Bicycle
June 30, 2015
With the number of bicycle riders estimated to have exceeded 10mn in Korea, there has been a
notable pickup in bicycle imports, which posted the strongest YoY growth in the
recreation/leisure goods category from January to May. Indeed, imports of camping gear,
trekking shoes, and leisure/hunting gear plunged 31%, 24%, and 9% YoY, respectively, while
imports of fishing goods and supplies expanded 15%. In contrast, bicycle imports surged more
than 35% YoY. From January to May, bicycles’ share in total recreation/leisure goods imports
approached 60%.
More than 70% of imported bicycles came from China in 2014, as most finished bike
manufacturers in Korea operate production lines in China or import components from Chinese
OEMs. The second highest proportion of imports came from Taiwan, at 23%, followed by Europe
(4%) and the US (1%).
The growth in imports seems attributable to the mostly wholesale nature of Korea’s bicycle
industry and the steady rise in bicycle demand.
Figure 6. YoY growth in imports of recreation/leisure goods:
Jan. to May 2015 vs. Jan. to May 2014
(%)
50
Figure 7. YoY growth in imports of recreation/leisure goods:
2014 vs. 2013
(%)
40
34.5
25
24.7
20
14.7
9.7
0
0
-6.5
-8.8
-25
-20
-23.6
-16.1
-30.6
-24.6
-40
-50
Bicycles
Fishing goods Leisure/hunting Trekking shoes Camping gear
gear
Fishing goods
Bicycles
Camping gear Trekking shoes Leisure/hunting
gear
Source: MCST, KCISA, KDB Daewoo Securities Research
Source: MCST, KCISA, KDB Daewoo Securities Research
Figure 8. Imports breakdown (Jan. to May 2015)
Figure 9. Imports breakdown (2014)
Camping gear
19%
Fishing goods
15%
Trekking shoes
7%
Camping gear
28%
Fishing goods
17%
Trekking shoes
9%
Bicycles
59%
Source: MCST, KCISA, KDB Daewoo Securities Research
KDB Daewoo Securities Research
Bicycles
46%
Source: MCST, KCISA, KDB Daewoo Securities Research
4
Bicycle
June 30, 2015
Market competition
Korea’s bicycle market is dominated by three domestic players, Samchuly Bicycle, Alton Sports,
and Very Good Leisure. Collectively, they commanded over half of the market in 2014, with
respective market shares of 31%, 11%, and 11%. Foreign makers Giant Bicycles (Taiwan), Merida
Bikes (Taiwan), and Specialized Bicycle Components (US) each held 4-5% of the market.
The bicycle market can be divided into low/mid-end (city bikes) and high-end segments. The city
bike category is an oligopolistic market, with Samchuly and its subsidiary Very Good Leisure
estimated to have a 60% market share, and Alton Sports 25%.
Besides the ability to secure quality components, having stable distribution channels is also key to
boosting bike producers’ competitiveness. As of 2014, there were around 2,400 bike shops
nationwide (estimate), with roughly 60% mainly selling products of Samchuly and its affiliates,
and 20% mainly selling products of Alton Sports.
The domestic market is showing several new trends. First, market growth has been driven by price
more than volume. Second, domestic bicycle manufacturers are diversifying their product
portfolios beyond standard bicycles to stroller tricycles, electric bikes, and equipment and
accessories. Third, in line with market growth and shifting trends, the government is expected to
continue introducing supportive policies, including the development of related infrastructure.
Figure 10. Companies’ market shares in domestic bicycle
market (2014)
Other
28%
Trek
2%
Merida
4%
Specialized
4%
Giant
5% Elfama
5%
Samchuly
31%
Figure 11. Domestic bicycle shop breakdown by main brands
sold (2014)
Overseas
brands:
160,
7%
Other:
250,
10%
Alton Sports
10%
Very Good
Leisure
11%
Samchuly:
1,290,
54%
2014:
2,400 shops
Alton Sports:
500,
21%
Cello Plus:
200,
8%
Source: Respective companies’ data, KDB Daewoo Securities Research
Source: Respective companies’ data, KDB Daewoo Securities Research
Figure 12. Size of global bicycle market (2013)
Figure 13. Market breakdown by region (2013)
(mn units)
120
North America
China
Southeast Asia
Japan
Oceania
Europe
India/Africa/Middle East
South America
Korea
Taiwan
100
Japan
8%
Oceania
Korea 1% Taiwan
1%
North America
1%
12%
South America
10%
80
Europe
25%
60
Southeast Asia
10%
40
20
India/Africa/
Middle East
11%
0
Global market size
Source: Shimano, KDB Daewoo Securities Research
China
21%
Source: Shimano, KDB Daewoo Securities Research
KDB Daewoo Securities Research
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Bicycle
June 30, 2015
Table 1. Bicycle market trends
Country
Europe
North America
Market trends
· Bicycle commuting is widespread
· Multiple finished product makers; Region with world’s strongest demand
· Strong demand for mountain bikes and children’s bikes
Southeast Asia
· High penetration (due to poor car infrastructure and low income levels)
· Many famous cyclists are from Southeast Asian countries
Middle East
· Cycling is less popular than in other regions
South America
· Cycling for leisure and as an alternative mode of transport is growing
Australia
· Demand is shifting from high-end to lower-end (i.e., commuting-use)
bicycles
Japan
· Size of market has been on the decline since reaching a high of over
10mn units (five times bigger than the Korean market) a couple years ago
· Mostly low-priced bicycles; Lack of bicycle roads
China
· 40mn units sold
· Sales of cars, motorbikes, and electric bikes are all growing
Taiwan
· A mature market
Korea
· Cycling for leisure and as an alternative mode of transport is growing
· High-end model sales are expanding
Source: Samchuly Bicycle, KDB Daewoo Securities Research
KDB Daewoo Securities Research
6
Bicycle
June 30, 2015
SWOT analysis
1) Strengths
With government support, Korea has built among the world’s best bicycle path networks.
Recognizing bikes as an eco-friendly alternative mode of transportation, the government is
continuing to invest in bike facilities (e.g., expanding bicycle parking lots near subway stations and
bus stops in an effort to connect cycling and public transportation). In addition, legislators are
pushing to ease regulations on electric bikes to encourage cycling.
Based on this strong infrastructure, Korean bike producers (low/mid-priced brands) have
expanded their distribution channels nationwide, securing oligopolistic market shares in city bikes.
As market penetration is still low (29%), the growing perception of bicycling as a leisure
activity/sport should lead to steady demand growth.
2) Weaknesses
As Korean bike producers mostly sell low/mid-end products, their brand image in the high-end
segment is weak relative to that of foreign brands. And with the domestic low/mid-end bike
market maturing, volume growth should be limited going forward. Electric bikes, which have the
potential to become a mid- to long-term growth driver, are subject to tighter regulations than
regular bikes.
3) Opportunities
While Korea’s bicycle industry remains confined to the domestic market, domestic bike makers
will make another leap forward if they find ways to export their products. We believe they have a
better chance of wooing foreign customers with stroller tricycles and electric bikes than with city
bikes. As Korea has a strong competitive edge in IT components such as lithium-ion batteries (LIB)
and motors, electric bikes should open new growth opportunities for Korean bike manufacturers
once the segment is deregulated.
4) Threats
As most Korean bike sellers are wholesalers that import components (from China, Taiwan, etc.)
and sell assembled products, they are vulnerable to import disruptions and F/X rate changes (e.g.,
sudden weakness in the value of the won). Furthermore, the possible entry of foreign brands to
the domestic city bike market could pose a threat.
Figure 14. SWOT analysis of domestic bicycle market
Source: KDB Daewoo Securities Research
KDB Daewoo Securities Research
7
Bicycle
June 30, 2015
II. Changing market trends
1. Price increase across all categories
1) Primary users shifting from teenagers to people in their thirties or older
The perception of bicycles is changing. While they used to be associated with teenagers cycling to
school, a growing number of people in their 30s and older are enjoying cycling as a leisure activity.
Being more financially capable, these age groups tend to focus more on functions, quality, design,
and after-sales services than on price. In Korea, the introduction of the five-day workweek system
in July 2011 has encouraged the working population to engage in more leisure activities on the
weekends, which is also positive for the bike industry.
Bike riding has become more organized and professional, with participation in riding clubs
growing. Such dedicated bicyclists tend to show strong brand loyalty, and thus have relatively
high repurchase rates. The use of smartphone applications related to bike trips is also growing.
Functions vary by application, but typically allow users to map their bike routes and see their
average speed, calories consumed, and heart rate. Furthermore, bicyclists are increasingly sharing
their riding experiences on social media.
2) Demand shifting from low/mid-end to high-end models
With people in their 30s and older emerging as the primary buyer group, mid/high-end product
sales have increased. Bicycle demand from seniors is also on the rise.
Hardware is also improving. Mountain bikes are heavy, due to their thick wheels and steel frames.
Now, hybrid and road bike demand is increasing, as they are lighter and sleeker thanks to the
adoption of aluminum or carbon body frames.
The demographic shift in bike riding and the resulting growth in high-end model demand are
pushing ASP higher.
Figure 15. Rate of bicycle usage by age (Korea)
(%)
5
2000
2010
4
3
2
1
0
9 and younger
10s
20s
30s
40s
50s
60s
70 and older
Source: Korea Expressway Corporation Research Institute, KDB Daewoo Securities Research
KDB Daewoo Securities Research
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Bicycle
June 30, 2015
Figure 16. Preferences of bicycle consumers are changing (mountain bikes  hybrids  road bikes)
Source: Samchuly, KDB Daewoo Securities Research
Figure 17. Rate of bicycle usage for transportation in Seoul (by age)
Figure 18. Rate of bicycle usage for fitness in Seoul (by age)
(%)
(%)
20
30
25
15
20
15
10
10
5
5
0
0
10s
20s
30s
40s
50s
10s
60 and older
20s
30s
40s
50s
60 and older
Source: Seoul city (2012), KDB Daewoo Securities Research
Source: Seoul city (2012), KDB Daewoo Securities Research
Figure 19. ASP of domestic bicycles
Figure 20. Three major domestic bicycle makers’ ASP growth
from 2010 to 2014
(W'000)
300
(%)
70
Domestic bicycle ASP
62.2
275
271
60
250
266
258
226
197
200
50
40
196
35.7
30
161
23.4
20
150
10
0
100
08
09
10
11
12
13
14
15F
Source: Korea Customs Service, Samchuly Bicycles, KDB Daewoo Securities
Research
Samchuly
Alton Sports
Very Good Leisure
Source: Company data, KDB Daewoo Securities Research
KDB Daewoo Securities Research
9
Bicycle
June 30, 2015
2. Business diversification: Electric bikes, children’s tricycles, and accessories
Domestic bicycle makers are diversifying their businesses into electric bikes, children’s tricycles,
and accessories. As the domestic market matures, prices are driving the market’s expansion amid
a slowdown in sales volume growth. Companies appear to recognize the limited upside of pricedriven growth, and we believe domestic players’ business diversification should provide newfound growth momentum.
1) Electric bikes are a future growth engine
As of 2014, the domestic electric bike market was estimated at 15,000-20,000 units, less than
0.1% of the global market (about 37mn). The Korean market blossomed from the late 2000s until
early 2010, and has been supported by B2B demand (for use by government agencies and as a
means of transportation at large manufacturing sites).
Currently, electric bike users are required to obtain motorcycle licenses and cannot use bike
paths. The bikes’ high prices (W1.5-3mn) are also depressing growth in B2C demand. While some
companies have turned their eyes to the overseas markets, exports remain meager.
However, we are positive about the future of the electric bike market, as calls for the lifting of
discriminatory regulations against electric bikes are growing. There is growing agreement among
policy makers that regulations on electric bikes should be eased to facilitate environmentally
friendly transportation.
Furthermore, given domestic IT companies’ competitiveness in batteries and electric motors (key
components of electric bikes), electric bike makers should be able to take advantage of advanced
technology. Electric bike makers are also actively trying to reduce production costs and preparing
to introduce bikes priced at less than W1mn.
Most importantly, the domestic electric bike market is only in the nascent stage of growth. In our
view, electric bikes are likely to serve as a long-term growth driver for the domestic bike market
given the anticipated easing of regulations and the segment’s huge upside potential. Korea’s bike
penetration rate is still low compared to the levels in advanced economies. If demand for leisureor commuting-use electric bikes picks up, bike penetration in Korea should expand sharply.
Figure 21. Size of global electric bicycle market
Figure 22. Size of domestic electric bicycle market
('000 units)
40
Domestic electric bicycle market size
(US$mn)
11,500
11,000
10,700
10,850 10,900
11,000
30
30
10,500
10,000
10,000
9,600
20
20
17
9,500
9,000
9,000
8,500
10
10
8
8,400
0
8,000
2013
2015F
2017F
Source: Navigant Research, KDB Daewoo Securities Research
KDB Daewoo Securities Research
2019F
11
12
13
14
15F
Source: Samchuly, KDB Daewoo Securities Research
10
Bicycle
June 30, 2015
Table 2. Major electric bicycle models in Korea
Samchuly: Phantom
Alton Sports: E. Mammoth
Mando: Footloose IM
PAS / Throttle
-
25km/h
Product
Driving
System
Max speed
24km/h
25km/h
Throttle 40km / Power assist first gear 90km
-
-
Motor
36V 250W BLDC motor
36V 250W BLDC motor
Dual winding motor, 250W
Battery
LIB 36V 9.6Ah
LIB 36V 9.6Ah
LIB 36V 8.2Ah
Display
LCD
LCD
Removable color LCD
Shimano’s 7-gear gearshift
Shimano’s 7-gear gearshift
Auto electronic transmission (manual
transmission mode available)
Mileage
Gearshift
Brake
V brake
Disk brake
-
Weight
18.9~21.8kg
24.7kg
21.7kg
Price
W1,350,000
W1,600,000
W2,860,000
Source: Company data, KDB Daewoo Securities Research
Figure 23. Growth road map of electric bicycles industry
Source: Korea Expressway Corporation Research Institute, KDB Daewoo Securities Research
KDB Daewoo Securities Research
11
Bicycle
June 30, 2015
2) Children’s tricycles hold solid growth potential
Tricycles for children have typically been supplied by toy makers or specialized tricycle
producers/distributors, with most companies importing and distributing finished products.
However, domestic bicycle makers have rapidly expanded their market shares in the tricycle
segment over the past two to three years. In particular, tricycle strollers that can be reclined and
folded (upgrades over previous models with only sun shades) appear to be popular with
consumers. In our view, the biggest merit of tricycle strollers is that they can be used first as
strollers and then as independent tricycles (by easily removing the push bar, foot rest, etc.) as the
child grows.
The children’s tricycle market began to pick up three to four years ago. According to the Korea
International Trade Association, the domestic tricycle market is estimated at less than W50bn.
Given that the domestic stroller market is three to four times that amount, the tricycle stroller
market holds great growth potential.
The growth of the children’s tricycle market should boost revenue at domestic bike producers.
Amid Korea’s low birth rate, the children’s tricycle business (part of Korea’s child-focused “angel
industry”) is expected to maintain steady growth through a focus on high-end segments and
differentiated products. In addition, for domestic players, children’s tricycles should serve as an
export driver along with electric bikes.
Table 3. Major tricycle stroller models
Samchuly: MODI
ZOKO: ZOKO TRIKE
SmarTrike: Recliner
Ginaworld: Comfotriker
Product
∙ Price: W300,000
400,000
∙ Aluminum frame
Features
∙ Stroller-type canopy
∙ Backrest with adjustable
angle
∙ Price: W100,000
200,000
∙ Danger prevention
system on front wheel
∙ Bicycle for adult frame
∙ Ergonomic handle
∙ Price: W100,000
300,000
∙ Stroller-type canopy
∙ Stroller foot brake
∙ Slip prevent pedal
∙
∙
∙
∙
Price: W100,000-200,000
Stroller-type canopy
Safe lock pedal
Safe guard
Source: Company data, KDB Daewoo Securities Research
Figure 24. Size of domestic tricycle market (based on volume)
Figure 25. Companies’ market shares in domestic tricycle
market
('000 units)
300
239
250
253
213
Other
29%
Samchuly
36%
200
150
IDES Cargo
2%
100
SmarTrike
7%
50
0
2012
2013
Source: KITA, KDB Daewoo Securities Research
KDB Daewoo Securities Research
2014
Ginaworld
12%
ZOKO
14%
Source: KITA, KDB Daewoo Securities Research
12
Bicycle
June 30, 2015
Figure 26. Korean birth rate trend
(%)
5
Birth rate
4
3
2
1
0
1970
1980
1990
2000
2010
Source: KOSTAT, KDB Daewoo Securities Research
Figure 27. Korea population breakdown by age
80 and older
70-79
60-69
50-59
40-49
30-39
20-29
10-19
0-9
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
Source: UN, KDB Daewoo Securities Research
Figure 28. Breakdown of Chinese population by age (as of
2013)
0-9
China
80 and older
Figure 29. Comparison of population by country (as of 2013)
10-19
20-29
30-39
40-49
50-59
60-69
70-79
80 and older
Japan
70-79
60-69
Korea
50-59
40-49
China
30-39
Vietnam
20-29
10-19
Laos
0-9
0%
5%
10%
Source: UN, KDB Daewoo Securities Research
15%
20%
0%
20%
40%
60%
80%
100%
Source: UN, KDB Daewoo Securities Research
KDB Daewoo Securities Research
13
Bicycle
June 30, 2015
3) Surging demand for bike equipment and accessories
The domestic bicycle market is growing, as is the perception of bicycling as a leisure activity. As
such, demand for equipment and accessories as well as higher-end bicycles is growing rapidly.
Under the Road Traffic Act, children under 13 must wear helmets when riding bicycles, and adult
bike riders are increasingly wearing proper protective gear, as well. Sales are expanding markedly
for helmets, locks, bicycling lighting, and knee/elbow protectors, as well as water bottles, cycling
shoes/clothing, and smartphone holders.
The surge in bicycle clubs in Korea has helped give rise to the culture of wearing protective gear
when riding. However, according to a survey conducted by the Ministry of Culture, Sports and
Tourism in the “Sposumer Report” (published by the Korea Institute of Sport Science and the
Korea Sports Promotion Foundation), three out of four bike riders do not use proper protective
gear. This suggests the safety equipment market still has ample upside.
The survey found that while the majority of bikers selected helmets as the most important safety
gear, only a quarter of respondents reported actually wearing them. Thus, Korean bicyclists
appear to lack safety awareness, and improving their awareness should lead to growth in bike
equipment sales. Notably, bicycle equipment and accessories boast strong margins. Hence,
growth in the market should also contribute to profitability growth at manufacturers.
Figure 30. Bicycle accessories
Source: Shutterstock, KDB Daewoo Securities Research
KDB Daewoo Securities Research
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Bicycle
June 30, 2015
3. Favorable policy direction and excellent infrastructure
We believe the government’s policy stance with respect to the bicycle industry will remain
favorable, in view of the fact that bicycles are environmentally friendly and emit no carbon.
The central and local governments are making active efforts to facilitate bicycle riding to ease
urban traffic congestion, reduce energy consumption, and promote public health. In 2010, the
Ministry of Government Administration and Home Affairs began to support the domestic bicycle
industry by announcing the National Bicycle Policy Master Plan.
1) National Bicycle Policy Master Plan
Drawn up in 2009 and announced in 2010, the National Bicycle Policy Master Plan includes
measures to 1) expand bicycle-only roads, 2) increase the share of bicycles in public
transportation, 3) improve access to other public transportation and ease traffic congestion, 4)
reduce environmental pollution and promote public health, 5) rejuvenate the local economy
through tourism, and 6) designate 10 “foothold” cities for bicycle riding.
The government is believed to have spent a total of W100bn (allocating W10bn to each foothold
city over three years, from 2010 to 2012) for the creation of bicycle-only roads and parking lots,
the distribution of public bicycles, and the promotion of safety awareness. Among those
measures, the creation of bicycle-only roads is still underway. The government also announced
plans to invest about W1tr over 10 years (from 2010 to 2019) to establish a nationwide network
of bicycle paths.
Figure 31. Government efforts to facilitate bicycle riding and National Bicycle Policy Master Plan
1997: Standards and models for bicycle facilities installation
and maintenance
1998-2004: Government projects to facilitate bicycle riding
2001: Revision to Industry Development Act
– Support for bicycle and motor boat businesses
2005: Enactment of Act on the Support and Promotion of
Utilization of Mass Transit System
2006: Implementation of Road Traffic Act; Children required to
wear safety helmets
2008: Comprehensive measures to facilitate bicycle riding
National
development
Basic plans for land
development
National bicycle policy
Plans for metropolitan cities
Transportation plans
Urban plans
Comprehensive bicycle plans
Basic plans
2009: Nationwide bicycle road network plan selected as a
a low-carbon green growth strategy
2010: National bicycle policy master plans
2011: 19th revision to Promotion of the Use of Bicycles Act
Environment
Long-term
plans
Landscape
Park/
greenspace
Local governmentsÊ long-term
development plans
Bicycle
master plans
Urban management plans
Bicycle foothold cities
Individual projects
Pilot cities
2010-2012: Support for 10 foothold cities for bicycle riding
- Budget of W100bn (Gangneung, Gumi, Gunsan, Seogwipo, Suncheon, Asan, etc. )
2013: Construction of bicycle roads along east coast
- Expansion of nationwide bicycle path network
2014: Improvement in infrastructure in accident-prone areas
- Bicycle priority roads
2014-2015: Construction of new bicycle roads
Urban
development
Urban
Transportation
Infrastructure construction
Source: Ministry of Government Administration and Home Affairs, KDB Daewoo Securities Research
KDB Daewoo Securities Research
15
Bicycle
June 30, 2015
A nationwide bicycle path project that began in 2010 and is expected to be completed this year
will result in a 1,742km network of paths allowing bicycle trips throughout the country. In
addition, the number of bicycle users in Korea has increased to approximately 12mn.
2) National promotion of non-motorized, carbon-free transport
At the end of 2011, the Korean government released the first round of comprehensive plans to
promote non-motorized, carbon-free modes of transport. The plans called for W1tr in
investments over five years to establish biking and walking lanes connected to public
transportation, with the aim of easing traffic congestion, saving energy, reducing greenhouse gas
emissions, and facilitating the bike culture.
In detail, the government’s bike promotion measures (which were begun in 2012 and are still in
progress) are as follows:
① Establishing walking and biking infrastructure: Build bicycle lanes nationwide, supply more
than 8,000 public bicycles, and establish more than 700 bicycle parking lots in public
transportation facilities.
② Connecting bicycles with public transportation: Build biking-friendly transportation systems,
and expand bicycle parking at subway stations.
③ Encouraging the use of bicycles for commuting to school and work: Designate 60 schools to
participate in a pilot biking promotion program, and provide incentives for bicycle-friendly
workplaces.
④ Encouraging the biking culture: Employ people to monitor walking and biking lanes, set up
biking-related events (e.g., Day of Biking), and expand bicycle parking for biking events.
⑤ Establishing non-motorized/carbon-free transportation: Expand mobile app services for ecofriendly bicycle tour guides, and build mobile app services for related information (e.g., nearby
accommodations).
We believe such bike-friendly policies should benefit bicycle producers. In addition, the fact that
foreigners are visiting Korea for bicycle tours is evidence of the strong competitiveness of Korea’s
bicycle infrastructure. For these reasons, we expect the domestic bicycle market to show growth.
Table 4. Ten base cities for biking promotion programs
Base cities
Gyeonggi
Province
Kangwon
Province
North
Chungcheong
Province
South
Chungcheong
Province
North Jeolla
Province
South Jeolla
Province
North
Gyeongsang
Province
Details
Ansan
Industrial city; Provide incentives for bike users
Gangneung
Low-carbon green city; Link biking to tourism
Jeungpyeong
County
Green growth city; Link biking to conventional markets
Asan
Establish bike lanes and connection to public transportation
Gunsan
Suncheon
City with advanced transportation system; Operate a bike lane alongside
Saemangeum Seawall
Eco city where an international garden exhibition was held; Encourage bikers to
commute from residential to industrial areas
Gumi
Eco-industrial complex; Encourage bikers to commute from residential to industrial
areas
South
Gyeongsang
Province
Changwon
Establish/operate the nation’s largest public bike system
Jinju
Education-focused city; Introduce bike insurance, and establish a bike lane alongside
Nam River
Jeju Province
Seogwipo
Establish a public biking system alongside Olleh walking courses
Source: Ministry of Public Administration and Security, KDB Daewoo Securities Research
KDB Daewoo Securities Research
16
Bicycle
June 30, 2015
Table 5. “Four Rivers Bicycle Paths” project
Path
Course
Distance
Cycling time
Hangang
Paldang bridge - Chungju Dam
136km
9 hours
Geumgang
Geumgang Estuary Bank - Daecheong Dam
146km
9 hours 40 minutes
Yeongsangang
Yeongsan river estuary dam - Damyang Dam 133km
8 hours 50 minutes
Nakdonggang
Nakdonggang Estuary Bank - Andong Dam
25 hours 55 minutes
Ara bike path
Ara west floodgate - Ara Hangang floodgate 21km
1hours 26 minutes
Hangang bike path(Seoul)
Ara Hangang floodgate - Paldang bridge
56km
3 hours 40 minutes
Saejae bike path
Tangeumdae Terrace - Sangpunggyo Bridge
100km
6 hours 40 minutes
Bukhangang bike path
Bright square - Sinmae Bridge
70km
4 hours 40minutes
Seomjingang bike path
Seomjingan Dam - Baealdo waterside park
155km
9 hours 55 minutes
Ocheon bike path
Hyeongchon intersection - Hapkkang park
105km
7 hours
389km
Source: 4Rivers Guide, KDB Daewoo Securities Research
Figure 32. Government’s master plan related to bicycle paths
Source: Ministry of Government Administration and Home Affairs, KDB Daewoo Securities Research
KDB Daewoo Securities Research
17
Bicycle
June 30, 2015
Figure 33. Map of bicycle path plan
Source: Ministry of Government Administration and Home Affairs, KDB Daewoo Securities Research
KDB Daewoo Securities Research
18
Bicycle
June 30, 2015
III. Major issues: Electric bikes
What is an electric bike?
An electric bike is a bicycle with an electric motor, battery, and controller. By stepping on the
pedal or pulling a switch, an electric signal is transmitted to a controller, which operates the
motor and thus the wheels.
There are two ways to operate an electric bike: PAS mode (pedal assist or power assist) and
throttle mode. The PAS mode relies on pedaling, while the throttle mode is operated in the same
manner as a motorcycle.
In the PAS mode, a small amount of pedaling is needed to operate the bike. This mode does not
consume significant battery power, and even when batteries are drained, the bike can be
operated by pedaling. On the other hand, the throttle mode relies on the handle grip to operate
the bike. Although it takes less effort, this mode consumes significant battery power. And if
batteries run out of power, pedaling is not an option for some electric bikes.
PAS-based bikes are widespread in Europe and Japan, with their popularity stemming from their
close similarity to regular bikes. The throttle mode, meanwhile, is proliferating in China and
Taiwan. In Korea, three types (PAS, throttle, and a hybrid version) co-exist, with none dominating
the market.
Electric bikes have faced design limitations due to batteries. Initially, electric bikes were heavy and
unattractive due to their large lead-acid batteries. Recently, however, electric bikes have become
slimmer and more attractive as lithium-ion batteries—which are slimmer and have three times
the battery life—have been replacing the environmentally harmful lead-acid batteries. And the
trend is likely to continue as the transition to lithium-ion batteries picks up speed.
Table 6. Types of electric bikes
Mode
PAS
Throttle
Hybrid
Details
Picture
- Pedaling to power a motor
- Widespread in Europe and Japan
- No need for pedaling; Throttle signal
activates motor
- More common in China and Taiwan
- Either throttle or PAS mode can be used at
any given time
- China, Taiwan, and Korea
Source: Korea Expressway Corporation Research Institute, KDB Daewoo Securities Research
KDB Daewoo Securities Research
19
Bicycle
June 30, 2015
Similarities to regular bikes outweigh differences
1) Need to ease discriminatory regulations on electric bikes
Under current laws, electric bikes are regarded as motorcycles. Motorcycles have an engine
displacement of less than 125cc or are fitted with a less than 50cc motor (Clause 19, Article 2 of
the Road Traffic Act). The bicycle law (Clause 1, Article 2) defines a bicycle as a two-or-more
wheeled vehicle with a pedal (or hand-pedal) operating system that uses human strength, a
steering system, and a controller.
Because the bicycle law stipulates that bicycles must rely on human strength, electric bikes are
categorized as motorcycles. In addition, under Article 80 of the Road Traffic Act, electric bike
users are required to obtain a license and are banned from using bike-only lanes.
Indeed, most middle and high school students are not qualified to use electric bikes to commute
to school, mainly due to the license requirement. Since August 2012, legislators have held talks
about revising the law, and the issue is still pending in the National Assembly. Despite their
similarity to regular bikes, electric bikes are subject to tighter regulations due to safety concerns
(electric bikes are faster and heavier than regular bikes).
As noted earlier, however, the accelerating transition to lithium-ion batteries is causing electric
bikes to become lighter and slimmer. Concerns over speed and weight could dissipate if these
factors are clarified in the law’s revision (if, for example, strict regulations apply only to heavier
electric bikes). But there are still differing opinions, dragging down the move to deregulate.
Furthermore, most consumers are unaware that electric bikes are subject to motorcycle
restrictions, causing confusion and non-licensed use.
Although the Korean electric bike market remains stagnant, the global market expanded to 36mn
units in 2013. The Korean market accounts for only 0.1% of the global market. Considering
Korea’s strong biking infrastructure and superior IT technologies, combined with electric bikes’
environmental friendly features and strong growth potential, we believe the easing of regulations
is urgent for Korea.
Figure 34. Electric bicycle agenda
2010 [Regulatory push to promote e-bike usage]
Calls for e-bikes to be categorized separately
2012 [Proposed revision to bicycle law]
Proposal that e-bikes with maximum power output of
330W, max. speed of less than 25km/h, and max. weight of
less than 40kg be categorized as bicycles
2015 [Proposed revision to bicycle law]
Proposal that e-bikes with maximum power output of
less than 330W, max. speed of 30km/h, and max. voltage of
48V be categorized as bicycles
Source: National Assembly Research Service, KDB Daewoo Securities Research
KDB Daewoo Securities Research
20
Bicycle
June 30, 2015
2) Domestic electric bike market accounts for less than 0.1% of the global market
The domestic electric bike market is estimated at 15,000-20,000 units (as of 2014), far smaller
than the Japanese market (400,000 units) and accounting for less than 0.1% of the global market
(37mn units).
Navigant Research projects the global electric bike market will grow at a CAGR of around 6%
from 2013 (US$8.4bn) to 2020. The Korea Expressway Corporation Research Institute reported
that China has the largest share of electric bikes, at 90% (34mn units), followed by Europe at 5%
(2mn units), Japan at 1% (400,000 units), and the US at 0.6% (250,000 units).
The CAGRs of the Chinese and Japanese electric bike markets from 2012 through this year are
estimated at 9% and 4%, respectively, while those of the European and US markets are estimated
at 19% and 100%, respectively. By 2020, the European and US markets combined are likely to
reach more than 20% of the global market.
In Europe, we expect to see a sharp increase in demand for electric bikes as a replacement for
cars. Interest in and awareness of environmentally friendly modes of transport is high in the
region. In addition, governments in Europe have been supporting projects to further the
development of electric bike technology, while also loosening restrictions on their use and
introducing them in the public sector, including for postal delivery services.
Chinese-made electric bikes are mostly equipped with lead–acid batteries. These batteries have
raised environmental concerns, leading to the introduction of regulations on their use. As such,
we believe electric bikes with lead–acid batteries will gradually be replaced with those with
lithium-ion batteries.
Indeed, the transition to lithium-ion batteries is currently a much-discussed issue in the electric
bike market. Since 1Q13, Samsung SDI has ranked first in the electric bike-use lithium-ion battery
market, claiming a market share of 25% in 4Q14.
Korean makers boast a competitive edge in core components, including electric motors and
controllers, as well as batteries. Therefore, the growth of the electric bike market will likely
promote the expansion of Korean IT firms as well as bicycle makers. And considering that electric
bikes can serve not only for leisure but also as an alternate mode of transport, allowing users to
travel longer distances than standard bicycles, we think the market will serve as a new growth
driver for Korea in the future.
Figure 35. Size of global electric bicycle market
Figure 36. Size of domestic electric bicycle market
('000 units)
40
Size of domestic electric bicycle market
(US$mn)
11,500
11,000
10,700
10,850 10,900
11,000
30
30
10,500
10,000
10,000
9,600
20
20
17
9,500
9,000
9,000
8,500
10
10
8
8,400
8,000
0
2013
2015F
2017F
Source: Navigant Research, KDB Daewoo Securities Research
2019F
11
12
13
14
15F
Source: Samchuly Bicycle, KDB Daewoo Securities Research
KDB Daewoo Securities Research
21
Bicycle
June 30, 2015
Table 7. Comparison of technology requirements by country
Technology requirements
Country
Operating system
Motor power
Max speed
EU
PAS
250W
25km/h
Japan
PAS
-
24km/h
China
PAS/Throttle
240W
25km/h
India
-
250W
25km/h
US
PAS/Throttle
750W
32km/h
Korea
PAS/Throttle
330W
30km/h
Source: Korea Expressway Corporation Research Institute, KDB Daewoo Securities Research
Table 8. Lead-acid battery and LIB comparison
Energy
density
Lead-acid battery
LIB
Notes
○
◎
LIB: Twice as high
(Wh/kg)
Weight (kg)
△ (10kg)
◎ (About 3kg)
LIB: Three times higher
Battery life (year)
△ (Less than one year)
◎ (About 3 years)
LIB: Three times higher
Range (Wh/km)
○
○
Similar
Notes: ◎ = excellent; ○ = satisfactory; △ = poor
Source: Korea Expressway Corporation Research Institute, KDB Daewoo Securities Research
Table 9. Electric bicycle sales volume in Europe (as of 2013)
Sales volume
(units)
Germany
Netherlands
Switzerland
Italy
France
410,000
171,000
52,900
48,200
46,100
Source: Korea Expressway Corporation Research Institute, KDB Daewoo Securities Research
Figure 37. Electric bike penetration rates (2013)
Source: Shimano, KDB Daewoo Securities Research
Figure 38. Electric bicycle market: Market share and CAGR by
country
Figure 39. Market share by country (2013)
Share
CAGR (2012-2015)
100%
90%
(34mn unnits)
Other
3.9%
India
0.6%
Japan
1.3%
China
89.3%
EU
4.9%
19%
5%
(2mn units)
EU
9%
China
1%
(0.4mn units) 4%
0.6%
(0.25mn units)
Japan
Source: Navigant Research, KDB Daewoo Securities Research
KDB Daewoo Securities Research
US
Source: Navigant Research, KDB Daewoo Securities Research
22
Bicycle
June 30, 2015
IV. Domestic bicycle industry investment strategy
Investment strategy and top pick
We initiate coverage on the bicycle industry with an Overweight recommendation. We present
market leader Samchuly Bicycle as our top pick, given its trend-setting leadership and dominant
market position. We recommend watching no. 2 industry player Alton Sports, which has its own
manufacturing plant and is seeking growth through exports. We also highlight Very Good Leisure,
which is likely to see earnings improvements on the back of the expansion of the premium bicycle
market and growth of the leisure business.
As noted earlier, the domestic bicycle market displays notable seasonality, with revenue and
operating profit tending to be highest in 2Q, followed by 3Q, 1Q, and 4Q. Share performance also
tends to be the most robust in 2Q and 3Q.
As such, short-term investors may adopt a trading strategy based on quarterly earnings.
However, we believe bicycle shares are also appropriate for long-term investors, as they have
been on an uptrend from a medium- to long-term standpoint.
Figure 40. Combined operating profit and market cap of the three major domestic bicycle
companies (Samchuly Bicycle, Alton Sports, and Very Good Leisure)
Source: Company data, WiseFn, KDB Daewoo Securities Research
Figure 41. Samchuly’s operating profit and share price
(Wbn)
10
8
Figure 42. Alton Sports’ operating profit and share price
(W)
30,000
Operating profit
Share price
25,000
6
20,000
4
15,000
2
10,000
0
5,000
-2
0
-4
1/10
10/10
7/11
4/12
1/13
10/13
7/14
Source: WiseFn, Samchuly, KDB Daewoo Securities Research
4/15
(Wbn)
6
Operating profit
(W)
18,000
5
Share price
16,000
4
14,000
3
12,000
2
10,000
1
8,000
0
6,000
-1
4,000
-2
2,000
0
-3
1/12
7/12
1/13
7/13
1/14
7/14
1/15
Source: WiseFn, Alton sports, KDB Daewoo Securities Research
KDB Daewoo Securities Research
23
Bicycle
June 30, 2015
Global peer earnings and valuations
Table 10. Earnings comparison
(Wbn, %)
Revenue
OP
OP margin
Net profit
Company
Mkt. cap
14
15F
16F
14
15F
16F
14
15F
16F
14
15F
16F
Samchuly
332
122
138
157
14
16
18
11.5
11.6
11.5
10
15
18
Very Good Leisure
183
76
81
90
6
10
12
7.9
-
-
3
8
9
Alton Sports
117
68
71
78
9
9
10
13.2
12.7
-
6
6
7
10.9
12.1
11.5
14,074
3,320
3,321
3,498
656
718
780
19.8
21.6
22.3
511
542
577
Giant
3,466
2,086
2,298
2,482
171
197
217
8.2
8.6
8.7
143
155
172
Merida
2,167
946
1,067
1,168
92
115
130
9.8
10.8
11.1
116
130
145
Fox Factory
685
323
387
421
36
48
64
11.3
12.4
15.3
29
31
42
KMC Kuei Meng
538
97
137
185
19
29
38
19.3
20.9
20.6
16
24
31
Avg. of domestic companies
Shimano
Avg. of overseas companies
Global average
13.7
14.9
15.6
12.6
14.1
14.9
Source: Bloomberg, KDB Daewoo Securities Research
Table 10. Valuation comparison
Company
Mkt. cap
Samchuly
332
Very Good Leisure
Alton Sports
P/E
P/B
EV/EBITDA
14
15F
16F
14
15F
16F
14
15F
16F
14
15F
16F
11.6
15.8
16.6
25.1
21.6
17.9
2.7
3.1
2.7
16.9
19.5
16.3
183
6.2
13.6
14.4
35.6
23.0
19.4
2.2
3.0
2.6
18.9
17.9
14.7
117
12.4
10.7
11.1
18.3
19.0
16.7
2.0
1.9
1.7
10.9
10.7
9.4
10.1
13.4
14.0
26.3
21.2
18.0
2.3
2.7
2.3
15.6
16.0
13.5
14.1
Avg. of domestic companies
Shimano
(Wbn, %)
ROE
14,074
17.1
17.5
16.9
28.3
25.8
24.2
4.4
4.3
3.8
16.5
15.3
Giant
3,466
22.4
21.0
21.7
25.6
22.0
19.8
5.4
4.6
4.2
18.1
14.8
13.5
Merida
2,167
30.3
27.4
27.2
19.2
16.7
15.0
5.3
4.4
3.9
21.3
16.4
14.6
Fox Factory
685
25.0
24.2
25.3
20.8
17.5
14.8
4.7
4.9
3.7
14.6
10.7
9.2
KMC Kuei Meng
538
24.6
25.5
23.6
28.8
22.5
17.4
6.0
5.2
4.0
20.4
15.1
14.6
Avg. of overseas companies
Global average
23.9
23.1
22.9
24.5
20.9
18.2
5.2
4.7
3.9
18.2
14.4
13.2
18.7
19.5
19.6
25.2
21.0
18.2
4.1
3.9
3.3
17.2
15.0
13.3
Source: Bloomberg, KDB Daewoo Securities Research
Figure 43. Relative share performances of domestic bicycle
companies
Figure 44. Relative share performance of overseas bicycle
companies
(-6M=100)
440
(1/7/2014=100)
400
Samchuly
Alton Sports
Very Good Leisure
Samchuly
Giant
Zhonglu
Accell
Ideal Bike
Shimano
Merida
Jinshan
Shenzhen China
360
300
280
200
200
100
120
40
0
9/14
11/14
1/15
Source: Bloomberg, KDB Daewoo Securities Research
KDB Daewoo Securities Research
3/15
5/15
6/14
8/14
10/14
12/14
2/15
4/15
6/15
Source: Bloomberg, KDB Daewoo Securities Research
24
Bicycle
June 30, 2015
Samchuly Bicycle (024950 KQ)
On the leading edge of industry trends
Initiate coverage with Buy and TP of W31,300
Buy
(Initiate)
Target Price (12M, W)
31,300
Share Price (06/29/15, W)
25,000
25%
Expected Return
OP (15F, Wbn)
16
Consensus OP (15F, Wbn)
17
EPS Growth (15F, %)
52.0
Market EPS Growth (15F, %)
37.3
P/E (15F, x)
21.6
Market P/E (15F, x)
10.9
KOSDAQ
733.04
Market Cap (Wbn)
332
Shares Outstanding (mn)
13
Free Float (%)
64.7
Foreign Ownership (%)
35.2
Beta (12M)
0.61
52-Week Low
17,350
52-Week High
28,300
(%)
1M
6M
12M
Absolute
5.9
31.6
27.6
Relative
2.8
-3.2
-7.5
150
SAMCHULY
KOSDAQ
130
We initiate our coverage on Samchuly Bicycle with a Buy rating and target price of
W31,300, based on a P/E of 24.6x our 12-month forward EPS of W1,274. Samchuly is
the largest bicycle company in the country, accounting for 42% of the domestic market
and controlling 62% of domestic distribution channels. Because of the lack of
comparable peers, we applied the company’s average P/E since 2013, when sales of
electric bikes and tricycle strollers began to take off. We could see further upside to
earnings depending on the pace of growth of the company’s new products.
Staying on the leading edge of industry trends
1) Rise in prices: As consumer preferences shift from mountain bikes to hybrid and road
bikes, sales of Samchuly’s mid/high-end models, such as Appalanchia, have been gaining
traction. We expect rising prices resulting from product mix improvements to drive
revenue growth of finished bicycles.
2) An “angel industry” play: Since its launch in 2013, Samchuly has quickly gained share
in the tricycle stroller market. Sales of tricycle strollers soared 74% in 2014 and are
forecast to grow more than 30% in 2015. Given their high profitability, the growth of
tricycle strollers should significantly contribute to overall margin improvement. The
company is also looking to make inroads into export markets and has recently begun
selling its tricycle strollers on China’s largest online shopping site, Tmall.com.
3) Growing equipment sales: Amid the growth in popularity of cycling as a leisure
activity, many cyclists are eager to spend money on the appropriate gear. As such,
Samchuly’s bicycle equipment (helmets, locks, protective gear, etc.) and accessories have
been selling briskly, a trend we believe will continue for some time.
4) Electric bikes to drive long-term growth: The company began selling electric bikes five
years ago and mostly supplies to businesses, which use the bikes as a means of
transportation at manufacturing sites. However, the company is expected to release a
budget model called the Phantom Eco in the near future. Looking forward, we expect
electric bike sales to individual customers to gain pace, especially once discriminatory
regulations against electric bikes are lifted.
Higher prices and new products to support long-term sustainable growth
110
90
70
6.14
10.14
2.15
6.15
We forecast Samchuly Bicycle to deliver record-breaking earnings in 2015, with revenue
of W138.2bn (+13.3% YoY), operating profit of W15.7bn (+12.6% YoY), and net profit of
W15.4bn (+52% YoY). ASP should rise on the back of an increasing mix of high-end
bikes, driving top-line growth of finished products. The company’s long-term growth
should be supported by new growth engines like electric bikes, tricycle strollers, and
cycling equipment. We also see earnings improvements at the company’s subsidiary
boosting equity-method gains.
FY (Dec.)
Revenue (Wbn)
OP (Wbn)
OP margin (%)
NP (Wbn)
EPS (W)
12/12
12/13
12/14
12/15F
12/16F
12/17F
109
111
122
138
157
177
8
9
14
16
18
22
7.3
8.1
11.5
11.6
11.5
12.4
8
9
10
15
18
21
577
661
761
1,157
1,394
1,613
ROE (%)
10.3
11.0
11.6
15.8
16.6
16.7
P/E (x)
17.3
29.3
25.1
21.6
17.9
15.5
P/B (x)
1.7
3.0
2.7
3.1
2.7
2.4
Note: All figures are based on non-consolidated K-IFRS
Source: Company data, KDB Daewoo Securities Research estimates
KDB Daewoo Securities Research
25
Bicycle
June 30, 2015
Corporate overview
In 1979, Samchuly was spun off from Kia Industries, which itself began as Kyungsung
Precision Industry in 1944 (renamed Kia in 1952). The company is currently the leading
domestic bicycle manufacturer and retailer.
Samchuly Bicycle, which was listed on the KOSDAQ in 1995, launched the high-end
brand Cello in 1996 and the mid/high-end model Appalanchia in 2006. In an effort to
take a more aggressive position in the high-end market, the company spun off its Cello
unit in 2007, creating subsidiary Very Good Leisure.
The domestic bicycle market is dominated by Samchuly Bicycle, Very Good Leisure, and
Alton Sports. As of 2014, Samchuly Bicycle and its subsidiary Very Good Leisure
controlled 42% of the total domestic bicycle market, followed by Alton Sports with 11%.
Foreign makers Giant Bicycles (Taiwan), Merida Bikes (Taiwan), and Specialized Bicycle
Components (US) each held 4-5% of the market. In the domestic general-use city bike
market, Samchuly Bicycle and Very Good Leisure controlled 60% (68% when also
including affiliate Smart Bike), while Alton Sports took up 25%.
In 2014, the number of domestic bicycle sales channels stood at around 2,400 (1,290 for
Samchuly Bicycle, 500 for Alton Sports, 190 for Very Good Leisure, 160 for foreign
brands, and 250 others). As such, Samchuly Bicycle and its subsidiary have dominated
the domestic sales network with a share of around 62%.
Figure 45. Samchuly’s general bicycle lineup
Figure 46. Samchuly’s electric bicycle lineup
Phantom Mini
Appalanchia
Lespo
PhantomXC
Source: Company data, KDB Daewoo Securities Research
Source: Company data, KDB Daewoo Securities Research
Figure 47. Samchuly Bicycle’s shareholders (as of end-1Q15)
Figure 48. Very Good Leisure’s shareholders (as of end-1Q15)
CEO and
related parties
28%
Minority
shareholders
26%
Other
33%
Foreigners
39%
Treasury stock
7%
Samchuly
38%
Young-ok
Park
14%
Truston Asset
5%
Cruisepa
9%
Source: DART, KDB Daewoo Securities Research
KDB Daewoo Securities Research
Treasury stock
1%
Source: DART, KDB Daewoo Securities Research
26
Bicycle
June 30, 2015
In 2014, city bikes accounted for 80% of Samchuly Bicycle’s revenue, with children’s
models, electric bikes, and equipment/accessories contributing 7%, 6%, and 9%
respectively. As for city bikes, Appalanchia, Lespo, Next, and Hound accounted for 14%,
53%, 5%, and 4%, respectively.
Major brands are as follows:
1) Lespo: Serving as a cash cow for Samchuly Bicycle, Lespo is the company’s best-selling
low/mid-end brand, offering 80 products ranging in price from W300,000 to W700,000.
It is targeted at young consumers.
2) Appalanchia: A mid/high-end brand, Appalanchia targets middle-aged and older
consumers, with a price range between W500,000 and W2mn. Its revenue contribution
has been rising the most sharply thanks to the company’s premium strategy.
3) Hound: This low/mid-end city bike brand is priced between W300,000 and W600,000
and is mostly available on online shopping malls.
4) Samtrike/Modi: Samtrike is a low-end tricycle stroller brand for children, while Modi is
a mid-end tricycle stroller. The tricycle stroller model is unique in that it can be used
either as a stroller (for young children) or as an independent tricycle.
Table 11. Samchuly Bicycle’s major brands
Appalanchia
Lespo
Hound
Samtrike/Modi
Brand name combines “leisure” and
“sports”; Best-selling low/mid-end
brand
W300,000-W700,000
Low/mid-end city bike brand,
mostly available on online shopping
malls
W300,000-W600,000
Used either as a stroller (for young
children) or as an independent
tricycle
W130,000-400,000
Brand
Premium brand targeting
Description middle-aged and older
consumers
Price
W500,000-W2mn
Source: Company data, KDB Daewoo Securities Research
Figure 49. Sales breakdown by brand (2014)
Figure 50. Sales breakdown by materials used (2014)
Goods for riders
8.5%
Appalanchia
17.3%
Children's
tricycles
6.2%
Goods for riders
10.6%
Elecrical
bicycles
5.6%
Samtirke
7.7%
Customized
products
0.8%
Brand
5.0%
Hound
5.2%
Carbon
0.8%
Aluminium
36.0%
Lespo
73.1%
Next
5.8%
Source: Company data, KDB Daewoo Securities Research
KDB Daewoo Securities Research
Steel
42.9%
Source: Company data, KDB Daewoo Securities Research
27
Bicycle
June 30, 2015
Four investment points
1) Higher prices
As consumer preferences shift from mountain bikes to hybrid and road bikes, sales of
Samchuly’s mid/high-end brand Appalanchia have been gaining traction. The brand has a
price tag of W500,000-W2mn vs. W300,000-W700,000 for Lespo and Hound. Hence,
increasing sales of Appalanchia should positively contribute to ASP.
Another positive driver will be electric bikes. Sales of electric bikes should take off once
regulatory hurdles are cleared, which would be positive to ASP given their much higher
price point (W1mn-W2mn). As the sales mix of Appalanchia and electric bikes steadily
grows, prices should increase, driving the growth of finished bicycles.
For finished bicycles, we forecast sales volume to grow 3.5% YoY to 848,598 units and
ASP to climb 8% YoY to W141,317 in 2015. As such, we estimate revenue from finished
bicycles to expand 11.9% YoY to W119.9bn in the year. In other words, we believe topline growth will be more driven by price than by volume, a trend that is likely to continue
for some time.
Figure 51. ASP of finished bicycles
('000 W)
160
(%)
ASP rising due to changing product mix
(from mid/low-end to→mid/high-end)
ASP (L)
40
YoY (R)
140
30
120
100
20
80
10
60
40
0
20
0
-10
10
11
12
13
14
15F
16F
17F
Source: Company data, KDB Daewoo Securities Research
Figure 52. Sales volume of finished bicycles
Sales volume (L)
YoY (R)
('000 units)
1,000
(%)
10
5
800
0
600
-5
400
-10
200
-15
-20
0
10
11
12
13
14
15F
16F
17F
Source: Company data, KDB Daewoo Securities Research
KDB Daewoo Securities Research
28
Bicycle
June 30, 2015
2) Beneficiary of “angel industry” growth
In 2013, Samchuly launched its tricycle stroller brand Samtrike. Sales of the brand soared
74% in 2014 and are expected to grow more than 30% in 2015. Currently, there is not
much competition in the tricycle stroller market.
The biggest advantage of Samchuly’s tricycle strollers is that they can be converted
based on the child’s developmental stage. Toddlers who are not yet able to pedal can
place their feet on the foot rest and use them as strollers. As the child grows, the bikes
can be adjusted so that the child can learn how to pedal with the parents’ help. Lastly,
the tricycle stroller can transform into a tricycle by removing the push bar and sun
canopy, allowing the child to start riding independently.
With a price tag of W130,000-W350,000, Samchuly’s bike strollers are much more
affordable than ordinary strollers. Given their affordability and convertibility, we expect
demand to continue to grow going forward. In addition to the low-end models Samtrike
300 and 500, the company also released a mid-tier model called the 700 Series and in
2014 launched the premium brand Modi.
In May 2015, the company rolled out Samtrike F, a foldable tricycle that can be stored in
small spaces. In 2016, the company plans to release a follow-up to its Modi model, which
will feature an electric motor that makes it easier to go up steeper slopes. Backed by its
diversified product lineup, Samchuly has been aggressively expanding its market share in
the tricycle stroller market.
We estimate Samchuly held 30% of the domestic market in 2013 and 37% in 2014. This
year, we expect the company’s market share to increase to over 40%. In a market
previously dominated by major toy makers, the company should rapidly increase its
presence by leveraging its expertise and extensive distribution network.
ASP has been trending higher, as the company continues to churn out higher-end
models and new products with updated features. And given their higher profitability, we
expect the growth of tricycle strollers to significantly contribute to overall margin
improvements.
Figure 53. Tricycle stroller revenue
Figure 54. Market shares of domestic tricycle makers
(Wbn)
20
18.3
15
Other, 29.2
13.6
Samchuly, 36.4
10.3
10
7.7
5
Company "I",
2.0
4.5
Company "S",
7.1
0
13
14
15F
16F
Source: Company data, KDB Daewoo Securities Research
KDB Daewoo Securities Research
17F
Company "G",
11.9
Company "Z",
13.4
Source: Company data, KDB Daewoo Securities Research
29
Bicycle
June 30, 2015
The export environment has been challenging because of the industry’s orientation
towards domestic demand and cut-throat competition overseas. However, we believe
Samchuly will make inroads into overseas markets with tricycle strollers, rather than
electric bikes (which are still subject to unfavorable regulations). In fact, the company
has begun selling its premium Modi units in April through China’s largest e-commerce
platform, Tmall.com, and second-largest online retailer, JD.com.
In China, we believe Modi units are distributed and sold by Little Tiger, a local OEM of
tricycles and toys that licenses the brand.
China’s one-child policy has given rise to a generation of “little emperors” (born after
1980), who tend to be more self-indulgent than previous generations. The so-called little
emperors are arguably the biggest force driving China’s private consumption. Now that
they are grown and have children of their own, they are eager to provide their children
with even more benefits than they themselves received. The growth of the “angel
industry,” which targets infants and children up to 14 years old, has become one of the
most notable trends in China’s consumer market.
We see immense potential in the angel industry given the money parents are willing to
lavish on their children. In our view, Samchuly is well-positioned to benefit from this
trend.
Figure 55. Samchuly’s tricycle stroller lineup
Source: Company data, KDB Daewoo Securities Research
Figure 56. Company is selling Modi units through Tmall.com,
China’s largest online shopping mall
Figure 57. Modi also being sold through JD.com, China’s
second largest online retailer
Source: Tmall.com
Source: JD.com
KDB Daewoo Securities Research
30
Bicycle
June 30, 2015
3) Growing sales of accessories and gear
With more and more people cycling as a leisure/sport activity, protective gear demand
has increased. (Children aged 13 and younger are required by law to wear helmets when
riding a bicycle.) Sales of bike equipment/gear (helmets, lights, locks, bike clothing and
shoes, etc.) and accessories (smartphone racks, water bottles, etc.) are rising quickly.
Indeed, most bike purchasers have also bought accessories and equipment.
Still, three out of four city bike riders do not wear safety gear properly, according to the
“Sposumer Report” sponsored by the Ministry of Culture, Sports and Tourism, the Korea
Sports Promotion Foundation, and the Korea Institute of Sport Science. This suggests
bike equipment and accessories have ample room for growth.
Samchuly’s bike equipment revenue expanded at a CAGR of around 20% from 2013
(W8.8bn) to 2014 (W10.6bn), and is expected to continue expanding at that rate from
2015 (W12.5bn) to 2016 (W15.4bn). As accessories and equipment are high-margin
products (though not as high as the tricycle stroller margin), their revenue growth
should bolster the firm’s overall bottom line.
Figure 58. Samchuly’s lineup of bicycle goods and accessories
Source: Company data, KDB Daewoo Securities Research
Figure 59. Sales forecast for Samchuly’s bicycle goods
(Wbn)
20
19.1
15.4
15
12.5
10.6
10
8.8
5
0
13
14
15F
16F
17F
Source: Company data, KDB Daewoo Securities Research
KDB Daewoo Securities Research
31
Bicycle
June 30, 2015
4) Electric bikes to become a mid- to long-term growth driver
Electric bikes have been commercially available in Korea since 2010, but demand has
been limited to government agencies and corporations (B2B). We believe that the
categorization of electric bikes as motorcycles—which leads to various legal
restrictions—is weighing on demand growth.
In Korea, electric bike users must obtain a motorcycle license or a type-1 driver’s license.
Due to the age limit on such licenses (16 for the motorcycle license), students younger
than 16 cannot ride such bikes to school. Furthermore, electric bikes are banned from
bike-only lanes.
Fortunately, we have recently noted a move among legislators to deregulate the electric
bike segment. If the Promotion of the Use of Bicycles Act is amended in the manner
legislators have suggested, electric bikes that fall under certain categories (in terms of
speed and weight limits) will be classified as bikes, not motorbikes. We are upbeat on
electric bike deregulation, as such bikes can help ease air pollution and traffic congestion
and be a useful mode of transport for seniors and students.
Samchuly will launch cheaper models next year, with a price tag of less than W1mn.
Although increased affordability should allow general consumers greater access (B2C), it
should take quite some time before electric bikes actually go mainstream. The domestic
electric bike market contributes less than 0.1% to the global market. As such, we see
strong growth potential both at home and abroad over the medium to long term.
Figure 60. Samchuly bicycles’ E-bike revenue
(Wbn)
15
Electric bike revenue
11.2
9.4
10
7.9
6.7
7.0
13
14
5
0.3
0
12
15F
16F
17F
Source: Company data, KDB Daewoo Securities Research
Figure 61. Samchuly Bicycle’s electric bike lineup
Phantom XC
Phantom CITY
Phantom MINI
Source: Company data, KDB Daewoo Securities Research
KDB Daewoo Securities Research
32
Bicycle
June 30, 2015
Earnings forecast
For 2Q, we expect Samchuly Bicycle to post record-high quarterly earnings, with revenue
of W53.4bn (+15% YoY, +84% QoQ), operating profit of W8.9bn (+8% YoY, +246%
QoQ), and net profit of W8.3bn (+11% YoY, +178% QoQ), aided by 1) high-demand
season, 2) higher ASP of finished bicycles, and 3) revenue growth across all business
units.
We forecast Samchuly Bicycle to deliver record-breaking earnings in 2015, with revenue
of W138.2bn (+13.3% YoY), operating profit of W15.7bn (+12.6% YoY), and net profit of
W15.4bn (+52% YoY). By unit, we forecast revenue of W112.1bn (+12% YoY) for city
bikes, W7.9bn (+12% YoY) for electric bikes, W10.3bn (+33% YoY) for children’s
tricycles, and W12.5bn (+18% YoY) for equipment/accessories.
We believe the finished bicycle business (city bikes and electric bikes) will continue to
serve as a cash cow for the company this year, accounting for 84% (78.5% and 5.5% for
city bikes and electric bikes, respectively) of total revenue. Meanwhile, revenue at the
children’ tricycle and equipment/accessories units will likely expand by 32% and 23%
YoY, respectively, contributing significantly to overall revenue growth. Given their high
margins, these units are also likely to boost the company’s overall profitability.
As for subsidiary Very Good Leisure (stake: 38.02%), earnings will likely improve sharply
on rapid revenue growth at the high-margin travel business unit. We forecast recordbreaking earnings for 2015, with revenue of W80.8bn (+7% YoY), operating profit of
W9.7bn (+59% YoY), and net profit of W8.0bn (+137% YoY). By unit, we expect the
bicycle and travel units to record revenue of W42bn (-7% YoY) and W38.8bn (+28%
YoY), respectively. As such, equity-method gains arising from Very Good Leisure will
likely increase. In addition, robust earnings at Very Good Leisure are likely to reduce the
seasonality of Samchuly Bicycle’s earnings, given that the bicycle and travel sectors’
high-demand seasons are in 2Q-3Q and 1Q and 3Q, respectively.
Table 12. Samchuly’s earnings forecast
(Wbn, %)
2014
Revenue
2015F
1Q
2Q
3Q
4Q
1Q
2QF
3QF
4QF
2013
2014
2015F
2016F
26.3
46.6
35.5
13.6
29.1
53.4
40.7
14.9
110.8
122.0
138.2
156.8
General bicycles
21.9
37.4
29.9
11.0
25.2
42.0
32.7
12.1
93.4
100.2
112.1
122.7
Electric bicycles
1.1
3.6
1.9
0.5
0.3
4.1
2.8
0.6
6.7
7.0
7.9
9.4
Children’s tricycles
1.5
3.7
1.8
0.8
1.3
5.0
3.0
1.0
4.5
7.7
10.3
13.6
Goods for riders
2.4
3.6
3.0
1.6
3.2
4.3
3.4
1.6
8.8
10.6
12.5
15.4
(Sales discounts)
(0.7)
(1.6)
(1.2)
(0.2)
(1.0)
(2.0)
(1.2)
(0.4)
(2.6)
(3.6)
(4.6)
(4.3)
18.5
Operating profit
2.1
8.3
5.4
-1.9
2.6
8.9
5.8
-1.5
8.6
14.0
15.7
OP margin
8.1
17.8
15.3
-13.9
8.9
16.7
14.2
-10.4
7.7
11.5
11.4
11.8
2.3
7.4
5.3
-4.9
3.0
8.3
5.8
-1.7
8.8
10.1
15.4
18.5
8.7
15.9
14.9
-36.1
10.2
15.5
14.2
-11.4
7.9
8.3
11.1
11.8
13.5
Net profit
Net margin
Growth (YoY)
Revenue
3.3
9.2
13.6
18.6
10.6
14.7
14.9
9.5
1.7
10.1
13.3
General bicycles
1.0
3.1
18.4
7.7
14.9
12.4
9.6
10.3
-9.4
7.2
11.9
9.5
Electric bicycles
40.8
4.0
-3.4
-12.0
-70.9
15.3
46.4
41.9
2079.1
5.0
11.7
19.9
244.4
102.5
11.2
32.2
-10.1
36.7
63.3
30.6
-
73.5
33.4
31.6
-0.8
21.9
26.9
49.0
31.9
20.0
13.0
1.1
2.2
20.2
18.0
23.1
Operating profit
15.1
54.4
39.1
-26.5
20.6
7.6
6.3
-18.1
6.6
63.3
12.6
17.3
Net profit
24.3
97.6
-0.6
130.5
29.6
11.4
10.1
-65.5
14.6
15.0
52.0
20.5
General bicycles
83.5
80.2
84.2
80.8
86.7
78.6
80.3
81.4
82.4
79.8
78.5
76.1
Electric bicycles
4.3
7.7
5.3
3.3
1.1
7.7
6.8
4.3
5.9
5.6
5.5
5.8
Children’s tricycles
5.7
7.8
5.2
5.6
4.6
9.4
7.4
6.6
3.9
6.2
7.2
8.4
Goods for riders
9.3
7.7
8.6
11.5
11.1
8.0
8.4
10.6
7.8
8.5
8.8
9.6
Children’s tricycles
Goods for riders
Sales breakdown (%)
Source: Company data, KDB Daewoo Securities Research
KDB Daewoo Securities Research
33
Bicycle
June 30, 2015
Table 13. Samchuly’s earnings forecasts and key variables
(Wbn, units, %)
2010
2011
2012
2013
2014
2015F
2016F
2017F
Revenue
73.3
89.8
109.0
110.8
122.0
138.2
156.8
177.0
Completed set
68.7
84.2
103.4
100.1
107.2
119.9
132.1
144.2
General bicycle
68.1
82.8
103.1
93.4
100.2
112.1
122.7
133.0
Electric bicycle
0.6
1.4
0.3
6.7
7.0
7.9
9.4
11.2
-
-
-
4.5
7.7
10.3
13.6
18.3
Bicycle for children
Goods for riders
4.0
5.8
8.7
8.8
10.6
12.5
15.4
19.1
(Sales discount)
0.6
(0.2)
(3.1)
(2.6)
(3.6)
(4.6)
(4.3)
(4.6)
12.9
Growth (YoY)
Revenue
-12.0
22.4
21.4
1.7
10.1
13.3
13.5
Finished bicycles
-13.2
22.6
22.8
-3.2
7.1
11.9
10.1
9.2
General bicycles
-13.3
21.6
24.5
-9.4
7.2
11.9
9.5
8.4
Electric bicycles
5.9
136.5
-78.3
2079.1
5.0
11.7
19.9
18.9
-
-
-
-
73.5
33.4
31.6
34.5
11.9
43.1
49.6
2.2
20.2
18.0
23.1
24.0
Children’s tricycles
Goods for riders
Sales breakdown
(%)
Finished bicycles
94.4
93.6
92.3
88.3
85.4
84.0
82.0
79.4
General bicycles
93.6
92.0
92.0
82.4
79.8
78.5
76.1
73.2
Electric bicycles
0.8
1.6
0.3
5.9
5.6
5.5
5.8
6.2
-
-
-
3.9
6.2
7.2
8.4
10.1
5.6
6.4
7.7
7.8
8.5
8.8
9.6
10.5
712,545
759,033
816,316
770,602
819,580
848,598
881,075
914,169
-5.5
6.5
7.5
-5.6
6.4
3.5
3.8
3.8
96,405
110,975
126,664
129,899
130,801
141,317
149,904
157,738
-8.2
15.1
14.1
2.6
0.7
8.0
6.1
5.2
1135
1152
1071
1055
1099
1100
1080
1090
1156
1108
1126
1095
1053
1087
1088
1089
Children’s tricycles
Goods for riders
Shipments of
finished bicycles
%, YoY
ASP of finished
bicycles
%, YoY
US$/W rate
(end of term)
US$/W rate
(avg.)
Source: Company data, KDB Daewoo Securities Research
Table 14. Very Good Leisure’s annual earnings
2014
Revenue
(Wbn, units, %)
2015F
1Q
2Q
3Q
4Q
1Q
2QF
3QF
4QF
2014 2015F 2016F
18.9
25.1
19.7
11.9
20.7
25.1
21.5
13.5
75.5
80.8
90.2
Bicycle
12.8
17.3
9.4
5.8
12.1
15.2
9.1
5.6
45.3
42.0
42.4
Tourism
6.1
7.7
10.3
6.1
8.6
9.8
12.4
7.8
30.2
38.8
47.8
1.8
1.8
4.1
-1.6
3.1
3.5
4.3
-1.2
6.1
9.7
11.6
12.8
Operating profit
Op margin
Net profit
NP margin
9.3
7.3
20.6
-13.1
15.0
14.0
19.9
-8.8
8.1
12.0
1.4
-0.4
4.3
-1.9
2.5
2.9
3.4
-0.8
3.4
8.0
9.5
7.5
-1.5
21.7
-16.2
12.3
11.4
15.9
-6.3
4.5
9.9
10.5
11.7
Growth rate (YoY)
Revenue
5.8
17.1
-11.1
20.0
9.5
0.1
9.3
13.3
5.9
7.0
Bicycle
-6.4
1.7
-32.0
8.1
-5.5
-12.0
-3.5
-3.0
-9.2
-7.3
1.0
Tourism
45.0
77.2
23.6
34.0
40.9
27.3
21.1
28.9
40.9
28.3
23.2
Operating profit
-1.7
4.6
14.0
24.0
76.1
Net profit
12.8 -128.6
33.0 137.0
91.4
5.4
-23.7
4.3
59.1
19.4
80.1 -855.1
-20.0
-56.2
-32.3
136.8
18.6
Sales breakdown
Bicycle
67.5
69.1
47.9
48.7
58.3
60.8
42.2
41.7
60.0
52.0
47.0
Tourism
32.5
30.9
52.1
51.3
41.8
39.2
57.8
58.3
40.0
48.0
53.0
Source: Company data, KDB Daewoo Securities Research
KDB Daewoo Securities Research
34
Bicycle
June 30, 2015
Figure 62. Sales breakdown of Very Good Leisure (2014)
Figure 63.Quarterly revenue of Very Good Leisure
(Wbn)
30
Bicycles
Tourism
25
20
Bicycles
40%
15
Tourism
60%
10
5
0
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15F
3Q15F
4Q15F
Source: Company data, KDB Daewoo Securities Research
Source: Company data, KDB Daewoo Securities Research
Figure 64. ASP of Very Good Leisure
Figure 65. Annual revenue and OP margin of Very Good
Leisure
(W'000)
1,000
(Wbn)
100
ASP
874
800
600
708
910
745
561
400
(%)
15
Revenue (L)
OP margin (R)
75
10
50
5
25
0
0
200
10
11
12
13
Source: Very Good Leisure, KDB Daewoo Securities Research
14
-5
07
08
09
10
11
12
13
14
15F
16F
Source: Very Good Leisure, KDB Daewoo Securities Research
Figure 66. Bicycle line-up
Silverado 90
Chrono Team
Elliot Team
Cayin Force
Source: Very Good Leisure, KDB Daewoo Securities Research
KDB Daewoo Securities Research
35
Bicycle
June 30, 2015
Initiate coverage with Buy and TP of W31,300
We initiate our coverage with a Buy rating and target price of W31,300, based on a P/E
of 24.6x our 12-month forward EPS of W1,274.
Samchuly is the largest bicycle company in Korea, accounting for 42% of the domestic
market and controlling 62% of domestic distribution channels. Because of the lack of
comparable peers, we applied the company’s average P/E since 2013, when sales of
electric bikes and tricycle strollers began to take off.
Bicycle penetration in Korea is just 29%, vs. more than 60% in advanced nations.
Although Korea’s electric bike market accounts for less than 0.1% of the global market,
we expect the Korean market to expand on the back of roll-outs of low-end electric bike
models and the anticipated easing of regulations. The company is seeing quick growth in
revenue related to tricycles and related accessories. Given the high margins of these
products, their sales should lead to quick earnings improvement.
The two-year average P/E of overseas peers is around 25x, and the average P/E of
domestic demand-related companies exceeds 25x. Given Samchuly’s market leadership
and strong growth potential, we believe the current P/E of 19.6x indicates upside
potential.
Table 15. Valuation
Figure
Net profit (Wbn)
Total number of
shares (‘000 shares)
EPS (W)
Target P/E (x)
16.9
13,274
1,274
24.6
Fair price (W)
31,346
Target price (W)
31,300
Price (W)
25,000
Mkt cap (Wbn)
Upside (%)
Notes
Based on 12-month forward EPS
As of end-1Q15
Based on 12-month forward EPS
Undisputed domestic leader with a market share of 42%; Due to
lack of comparable peers, we used the company’s recent twoyear average P/E
June 29th closing price
331.8
25.2
Source: KDB Daewoo Securities Research
Figure 67. P/E vs. EPS of global peers
(P/B, x)
KMC (Kuei Meng)
International
7.0
6.0
Fox Factor Holding
5.0
Shimano (Japan)
4.0
Giant (Taiwan)
Merida (Taiwan)
3.0
2.0
DOREL INDUSTRIES
Accell Group
(Netherlands)
Samchuly Bicycle
1.0
(ROE, %)
0.0
0
10
20
30
Source: Bloomberg, KDB Daewoo Securities Research
KDB Daewoo Securities Research
36
Bicycle
June 30, 2015
Risk factors
1) Potential demand contraction caused by the spread of MERS-CoV
We believe the recent spread of MERS-CoV might have dampened B2C demand.
However, as the outbreak occurred mostly in June (when revenue tends to be less than
in April and May), we estimate that the impact on 2Q earnings was only minimal.
In addition, people are unlikely to have perceived bicycling as especially risky in the midst
of the outbreak, given that it is an outdoor activity that does not involve being around
others in a small space. Thus, we do not believe bicycling demand has decreased
significantly. In fact, an increasing number of people see it as an activity that boosts
immunity. And biking commuters are growing.
2) F/X effects
Samchuly, which focuses on domestic operations, is significantly exposed to F/X risks
(mostly the US dollar) due to considerable imports of raw materials and finished
products. Unlike exporting companies, the company’s major risk is a weak won.
KDB Daewoo Securities Research
37
Bicycle
June 30, 2015
Samchuly Bicycle (024950 KQ/Buy/TP: W31,300)
Comprehensive Income Statement (Summarized)
Statement of Financial Condition (Summarized)
(Wbn)
(Wbn)
12/14
12/15F
12/16F
12/17F
122
138
157
177
Current Assets
41
48
58
68
Cost of Sales
81
91
103
116
Cash and Cash Equivalents
12
15
21
29
Gross Profit
41
47
54
61
AR & Other Receivables
8
10
11
13
SG&A Expenses
27
31
35
40
Inventories
11
13
14
14
Operating Profit (Adj)
14
16
18
22
Other Current Assets
10
10
12
12
Operating Profit
Revenue
12/14 12/15F 12/16F 12/17F
14
16
18
22
Non-Current Assets
78
84
90
96
Non-Operating Profit
0
3
5
4
Investments in Associates
30
30
30
31
Net Financial Income
0
0
0
0
Property, Plant and Equipment
42
49
54
59
Net Gain from Inv in Associates
1
3
4
4
Intangible Assets
2
2
2
2
14
19
23
26
119
133
148
164
25
26
26
24
3
3
3
3
15
15
13
10
Pretax Profit
Income Tax
Total Assets
4
3
4
5
10
15
18
21
0
0
0
0
Net Profit
10
15
18
21
Other Current Liabilities
7
8
10
11
Controlling Interests
10
15
18
21
Non-Current Liabilities
2
2
3
3
0
0
0
0
Long-Term Financial Liabilities
1
1
1
1
Total Comprehensive Profit
10
15
18
21
Other Non-Current Liabilities
1
1
2
2
Controlling Interests
10
15
18
21
Total Liabilities
28
29
29
27
0
0
0
0
Controlling Interests
91
104
119
137
15
17
19
23
2
4
6
8
Profit from Continuing Operations
Profit from Discontinued Operations
Non-Controlling Interests
Non-Controlling Interests
EBITDA
FCF (Free Cash Flow)
Current Liabilities
AP & Other Payables
Short-Term Financial Liabilities
Capital Stock
7
7
7
7
Capital Surplus
53
53
53
53
34
47
62
80
0
0
0
0
91
104
119
137
12/17F
EBITDA Margin (%)
12.3
12.3
12.1
13.0
Retained Earnings
Operating Profit Margin (%)
11.5
11.6
11.5
12.4
Non-Controlling Interests
8.2
10.9
11.5
11.9
Stockholders' Equity
Net Profit Margin (%)
Cash Flows (Summarized)
(Wbn)
Forecasts/Valuations (Summarized)
12/14
12/15F
12/16F
Cash Flows from Op Activities
10
11
12
14
P/E (x)
25.1
21.6
17.9
15.5
Net Profit
10
15
18
21
P/CF (x)
16.1
19.9
17.1
14.8
Non-Cash Income and Expense
6
1
1
1
P/B (x)
Depreciation
1
1
1
1
EV/EBITDA (x)
Amortization
0
0
0
0
EPS (W)
761
1,157
1,394
1,613
5
0
0
0
CFPS (W)
1,184
1,255
1,463
1,691
10,529
Others
12/14 12/15F 12/16F 12/17F
2.7
3.1
2.7
2.4
16.9
19.5
16.3
13.6
Chg in Working Capital
-3
-2
-3
-4
BPS (W)
7,064
8,035
9,196
Chg in AR & Other Receivables
1
-2
-1
-1
DPS (W)
200
250
300
350
Chg in Inventories
0
-1
-1
-1
Payout ratio (%)
24.5
20.1
20.1
20.2
Chg in AP & Other Payables
0
0
0
0
Dividend Yield (%)
1.0
1.0
1.2
1.4
Income Tax Paid
-3
-3
-4
-5
Revenue Growth (%)
9.9
13.1
13.8
12.7
21.1
Cash Flows from Inv Activities
-7
-8
-6
-6
EBITDA Growth (%)
66.7
13.3
11.8
Chg in PP&E
-8
-7
-6
-6
Operating Profit Growth (%)
55.6
14.3
12.5
22.2
Chg in Intangible Assets
-1
0
0
0
EPS Growth (%)
15.1
52.0
20.5
15.7
Chg in Financial Assets
-1
0
-1
-1
Accounts Receivable Turnover (x)
14.6
16.3
15.5
15.5
Others
3
-1
1
1
Inventory Turnover (x)
11.0
11.6
12.0
12.7
Cash Flows from Fin Activities
7
-2
-5
-7
Accounts Payable Turnover (x)
82.9
124.3
123.7
122.4
Chg in Financial Liabilities
-
-
-
-
ROA (%)
9.2
12.2
13.2
13.7
0
0
0
0
ROE (%)
11.6
15.8
16.6
16.7
-2
-2
-3
-4
ROIC (%)
17.5
20.3
21.0
22.6
-
-
-
-
Liability to Equity Ratio (%)
30.5
27.8
23.9
19.8
Chg in Equity
Dividends Paid
Others
Increase (Decrease) in Cash
Beginning Balance
Ending Balance
11
4
6
7
161.4
183.4
222.7
280.5
1
12
15
21
Net Debt to Equity Ratio (%)
Current Ratio (%)
-1.4
-5.0
-11.5
-17.7
12
15
21
29
Interest Coverage Ratio (x)
22.4
25.4
29.8
34.8
Source: Company data, KDB Daewoo Securities Research estimates
KDB Daewoo Securities Research
38
Bicycle
June 30, 2015
Alton Sports (123750 KQ)
Stability to be the focus this year
Only domestic bicycle maker with its own factory
Not Rated
-
Target Price (12M, W)
10,150
Share Price (06/29/15, W)
-
Expected Return
OP (15F, Wbn)
9
Consensus OP (15F, Wbn)
-1.6
Market EPS Growth (15F, %)
37.3
P/E (15F, x)
19.0
Market P/E (15F, x)
10.9
KOSDAQ
733.04
Market Cap (Wbn)
117
Shares Outstanding (mn)
12
Free Float (%)
57.5
Foreign Ownership (%)
2.3
Beta (12M)
1.68
52-Week Low
5,840
52-Week High
16,800
(%)
1M
6M
12M
Absolute
-7.7
1.7
69.2
Relative
-10.5
-25.2
22.6
Alton Sports
KOSDAQ
280
230
180
130
80
6.14
10.14
Alton Sports has achieved growth through M&As. In 2008, the company merged with
Corex. It began to develop and sell electric bikes after establishing subsidiary E-Alps in
2012 (with which it merged in 2014). In March this year, the company was acquired by
Innox, the leading electronic materials and component producer in Korea. Alton Sports is
expected to generate synergies with Innox in the materials area over the medium to
long term.
11
EPS Growth (15F, %)
330
Established in 1994 as Saeik Trading, the company changed its name to Alton Sports in
2001 and was listed on the KOSDAQ in 2011, after merging with Shinyoung Happy
Tomorrow No.1 SPAC. The company is the only bicycle maker in Korea with its own
factory, which is located in Tianjin, China and came online in 2008.
2.15
6.15
Exports to drive growth
Alton Sports’ competitiveness lies in 1) its ability to adjust production volume flexibly in
line with market conditions thanks to having its own factory, and 2) its focus on exports.
Korea’s bicycle market, which accounts for just 1.6% of the global market, is dominated
by three big companies, with most players focused on domestic sales. In particular, the
company with the largest market share (42%) controls over 60% of distribution
channels. Thus, Alton Sports, with its concentration on low/mid-end products, is likely to
have limited upside in Korea. Thus, it is positive that the company is focusing more on
exports of products, including electric bikes.
Despite robust sales of road bikes, namely its flagship model Roadmaster, mountain bike
and hybrid bike sales are both on the decline. However, the company will likely see a
slight upturn in revenue starting next year on the back of exports of electric bikes to
North America and city bikes to Japan and Southeast Asia, as well as an improved
product mix in line with an increasing revenue contribution from road bikes.
Stronger growth expected next year
We project Alton Sports’ 2015 revenue and operating profit at W71.3bn (+4.2% YoY)
and W8.6bn (+1.3% YoY). Quarterly growth is expected to slow in 2Q compared to last
year, with revenue of W27.3bn (+1% YoY, +54% QoQ) and operating profit of W5.1bn
(+0.3% YoY, +166% QoQ). It should take time for the acquisition by Innox to generate
synergies. As parts and materials determine the quality of finished products, the
acquisition should be positive for the company over the medium to long term. But in the
short term, the company is expected to focus more on stabilizing the organization.
FY (Dec.)
Revenue (Wbn)
OP (Wbn)
OP margin (%)
NP (Wbn)
EPS (W)
ROE (%)
12/12
12/13
12/14
12/15F
12/16F
12/17F
66
61
68
71
78
85
4
3
9
9
10
11
6.1
4.9
13.2
12.7
12.8
12.9
4
3
6
6
7
8
345
227
544
536
606
672
9.2
6.0
12.4
10.7
11.1
11.2
P/E (x)
12.4
21.9
18.3
19.0
16.7
15.1
P/B (x)
1.1
1.2
2.0
1.9
1.7
1.6
Note: All figures are based on consolidated K-IFRS; NP refers to net profit attributable to controlling interests
Source: Company data, KDB Daewoo Securities Research estimates
KDB Daewoo Securities Research
39
Bicycle
June 30, 2015
Although the bicycle market exhibits strong seasonality, with 2Q being the traditional
peak season, 2Q earnings are expected to be weaker than last year’s level with revenue
of W27.3bn (+1% YoY, +54% QoQ) and an operating profit of W5.1bn (+0.3% YoY,
+166% QoQ).
The new management that came along after the acquisition appears to be focusing
more on stabilizing the organization this year. They are in the process of fully adopting
the parent company’s system, establishing new strategies, and reshuffling staff.
Accordingly, the company’s key objective this year will likely be stability rather than
growth. We expect growth under the new management to take off starting next year.
We project Alton Sports’ 2015 revenue and operating profit at W71.3bn (+4.2% YoY)
and W8.6bn (+1.3% YoY). Road bikes are anticipated to drive up growth, with revenue
improving 157% in 2014 and 73% in 2015. Although the sales volume of hybrid bikes is
anticipated to decline for the second straight year, revenue is forecast to climb 10% on
the back of ASP growth. Mountain bike sales are trending down due to a slowdown in
demand.
The company’s sales volume growth (based on finished products) was -15.5% in 2013
and -4.3% in 2014, and is projected to be +1.9% for 2015 and +2.4% for 2016. ASP
growth was 10.3% in 2013 and 16.2% in 2014, and is estimated at 2.5% for 2015 and 7%
for 2016. Thus, for the time being, ASP should make a greater contribution to revenue
growth than sales volume.
We believe growth will take off starting next year, posting revenue of W78.2bn (+9.7%
YoY) and operating profit of W9.5bn (+10.2% YoY) in 2016.
Table 16. Quarterly earnings
(Wbn, %)
2014
1Q
2Q
2015F
3Q
4Q
1Q
2QF
2016F
3QF
4QF
1QF
2QF
3QF
4QF
2014
2015F
2016F
Revenue
14.6
27.1
19.2
7.5
17.7
27.3
19.0
7.2
18.8
30.1 21.4
7.9
68.4
71.3
78.2
General bicycles
13.6
25.2
18.4
7.0
17.3
25.9
18.0
6.7
18.0
28.4 20.2
7.3
64.2
67.9
73.9
Hybrid
5.4
11.0
7.2
2.3
5.7
12.2
8.2
2.6
6.3
13.3
9.3
2.9
26.0
28.7
31.8
Mountain
7.7
11.6
8.7
3.8
8.4
10.2
6.4
3.2
8.0
9.8
6.1
2.9
31.8
28.1
26.8
0.5
2.6
2.5
0.9
3.2
3.6
3.3
0.9
3.7
5.3
4.8
1.5
6.4
11.0
15.4
Electrical bicycles
Road
0.9
1.9
0.8
0.5
0.5
1.4
1.0
0.5
0.7
1.8
1.2
0.6
4.2
3.4
4.3
Operating profit
1.7
5.0
3.1
-1.3
1.9
5.1
2.8
-1.0
2.0
5.4
3.1
-1.0
8.5
8.6
9.5
OP margin
11.4
18.6
16.1
-16.8
10.7
18.5
14.5
-14.0
10.8
18.0 14.4
-12.9
12.5
12.1
12.2
Net profit
NP margin
1.3
4.3
2.0
-1.4
1.5
3.8
1.8
-0.9
1.6
2.2
-0.9
6.3
6.2
7.0
9.1
15.7
10.6
-17.9
8.2
13.9
9.6
-11.9
8.3
13.6 10.5
4.1
-11.0
9.2
8.7
9.0
Growth (YoY)
Revenue
2.0
19.7
23.2
-16.2
21.8
0.9
-1.4
-3.9
5.9
10.2 12.6
9.6
11.2
4.2
9.7
General bicycles
0.4
15.6
21.5
-13.3
26.6
3.0
-2.3
-4.2
4.5
9.3 12.2
9.2
9.6
5.7
8.8
Hybrid
-13.5
11.9
12.3
-4.5
5.1
11.0
13.2
12.2
10.0
9.0 13.2
12.0
4.0
10.5
10.7
Mountain
13.8
5.0
11.3
-30.0
8.3
-12.3
-25.8
-17.5
-3.9
-4.0
-5.8
-8.0
2.4
-11.6
-4.8
Road
-5.6
181.5
174.5
383.6
593.9
37.4
35.1
10.8
17.0
48.0 44.6
58.4
157.0
72.7
39.0
Electrical bicycles
33.0
124.7
26.8
Operating profit
24.8
Net profit
Sales breakdown
(%)
General bicycles
81.7
-42.3
-49.3
-26.3
19.3
-0.8
56.0
27.0 19.0
15.1
43.0
-19.2
42.4 4328.6
RR
14.5
0.3
-11.1
RR
6.7
7.4 11.9
RR
153.1
1.3
10.2
101.5
70.4
316.3
RR
9.8
-10.7
-10.9
RR
6.2
7.9 23.4
RR
139.2
-1.1
13.2
94.6
93.6
93.1
95.7
93.0
97.4
95.0
94.8
92.7
96.1
94.2 94.5
92.4
93.9
95.3
Hybrid
37.4
40.6
37.7
30.9
32.3
44.6
43.2
36.0
33.5
44.1 43.5
36.8
38.0
40.3
40.7
Mountain
53.1
42.9
45.2
50.8
47.2
37.2
34.0
43.6
42.8
32.4 28.4
36.6
46.6
39.5
34.3
3.1
9.6
12.9
11.4
17.9
13.1
17.6
13.1
19.7
17.6 22.6
18.9
9.4
15.5
19.6
6.4
6.9
4.3
7.0
2.7
5.0
5.2
7.3
3.9
7.6
6.1
4.7
5.4
Road
Electrical bicycles
5.8
5.5
Source: Company data, KDB Daewoo Securities Research
KDB Daewoo Securities Research
40
Bicycle
June 30, 2015
Figure 68. Sales breakdown (2014)
Figure 69. Annual revenue and OP margin
(Wbn)
100
Electric
6%
(%)
15
Revenue (L)
Road
9%
OP margin (R)
Hybrid
38%
75
10
50
5
25
Mountain
47%
0
0
10
11
12
13
14
15F
16F
Source: Company data, KDB Daewoo Securities Research
Source: Company data, KDB Daewoo Securities Research
Figure 70. Finished bicycles ASP
Figure 71. Finished bicycles sales volume
('000Won)
200
(%)
40
ASP (L)
('000Units)
800
17F
(%)
10
Sales volume (L)
%YoY (R)
%YoY (R)
30
150
5
600
0
20
400
100
-5
10
-10
50
0
-10
0
12
13
14
15F
16F
Source: Company data, KDB Daewoo Securities Research
17F
200
-15
0
-20
12
13
14
15F
16F
17F
Source: Company data, KDB Daewoo Securities Research
Figure 72. Bicycle lineup
R6021
Metis Ultegra
Estas-S
Source: Company data, KDB Daewoo Securities Research
KDB Daewoo Securities Research
41
Bicycle
June 30, 2015
Alton Sports (123750 KQ/Not Rated/TP: W0)
Comprehensive Income Statement (Summarized)
Statement of Financial Condition (Summarized)
(Wbn)
(Wbn)
12/14 12/15F 12/16F 12/17F
12/14
12/15F
12/16F
12/17F
Revenue
68
71
78
85
Current Assets
46
54
61
65
Cost of Sales
43
45
50
54
Cash and Cash Equivalents
12
15
19
20
Gross Profit
25
26
28
31
AR & Other Receivables
4
6
7
8
SG&A Expenses
16
17
19
21
Inventories
15
16
17
18
Operating Profit (Adj)
9
9
10
11
Other Current Assets
15
17
18
19
Operating Profit
9
9
10
11
Non-Current Assets
31
31
31
33
Non-Operating Profit
-1
-1
-1
-1
Investments in Associates
Net Financial Income
0
0
0
0
Property, Plant and Equipment
Net Gain from Inv in Associates
0
0
0
0
Pretax Profit
8
8
9
10
Income Tax
2
2
2
Profit from Continuing Operations
6
6
7
Profit from Discontinued Operations
0
0
0
Intangible Assets
0
0
0
0
19
19
20
21
7
7
6
6
Total Assets
76
84
92
98
2
Current Liabilities
20
23
24
24
8
AP & Other Payables
7
7
8
8
0
Short-Term Financial Liabilities
12
14
15
14
Net Profit
6
6
7
8
Other Current Liabilities
1
2
1
2
Controlling Interests
6
6
7
8
Non-Current Liabilities
1
1
1
1
Non-Controlling Interests
0
0
0
0
Long-Term Financial Liabilities
0
0
0
0
Total Comprehensive Profit
7
6
7
8
Other Non-Current Liabilities
1
1
1
1
Controlling Interests
7
6
7
8
Total Liabilities
21
24
26
25
Non-Controlling Interests
0
0
0
0
Controlling Interests
55
61
67
73
EBITDA
9
10
10
11
6
6
6
6
FCF (Free Cash Flow)
5
6
7
5
Capital Surplus
23
23
23
23
28
33
39
46
0
0
0
0
55
61
67
73
12/17F
Capital Stock
EBITDA Margin (%)
13.2
14.1
12.8
12.9
Retained Earnings
Operating Profit Margin (%)
13.2
12.7
12.8
12.9
Non-Controlling Interests
8.8
8.5
9.0
9.4
Net Profit Margin (%)
Cash Flows (Summarized)
(Wbn)
Stockholders' Equity
Forecasts/Valuations (Summarized)
12/14
12/15F
12/16F
Cash Flows from Op Activities
6
7
8
7
P/E (x)
18.3
19.0
16.7
15.1
Net Profit
6
6
7
8
P/CF (x)
11.3
12.2
11.1
10.1
Non-Cash Income and Expense
4
3
4
4
P/B (x)
2.0
1.9
1.7
1.6
Depreciation
1
1
1
1
EV/EBITDA (x)
10.9
10.7
9.4
8.2
Amortization
0
0
0
0
EPS (W)
544
536
606
672
3
2
3
3
CFPS (W)
881
832
914
1,004
6,440
Others
12/14 12/15F 12/16F 12/17F
Chg in Working Capital
-3
0
0
-2
BPS (W)
4,905
5,359
5,867
Chg in AR & Other Receivables
0
-2
-1
-1
DPS (W)
100
100
100
150
Chg in Inventories
-3
0
-1
-1
Payout ratio (%)
14.9
18.3
16.2
21.9
Chg in AP & Other Payables
1
0
0
0
Dividend Yield (%)
1.0
1.0
1.0
1.5
Income Tax Paid
-1
-2
-2
-2
Revenue Growth (%)
11.5
4.4
9.9
9.0
10.0
Cash Flows from Inv Activities
-10
-4
-3
-4
EBITDA Growth (%)
125.0
11.1
0.0
Chg in PP&E
1
-1
-1
-2
Operating Profit Growth (%)
200.0
0.0
11.1
10.0
Chg in Intangible Assets
0
0
0
0
EPS Growth (%)
139.6
-1.5
13.1
10.9
14.1
Chg in Financial Assets
-11
-2
-2
-2
Accounts Receivable Turnover (x)
16.6
16.7
14.1
Others
0
-1
0
0
Inventory Turnover (x)
4.9
4.6
4.8
4.9
Cash Flows from Fin Activities
3
1
0
-2
Accounts Payable Turnover (x)
8.1
8.7
8.8
9.1
Chg in Financial Liabilities
Chg in Equity
Dividends Paid
Others
-
-
-
-
ROA (%)
8.8
7.7
8.0
8.2
2
0
0
0
ROE (%)
12.4
10.7
11.1
11.2
-1
-1
-1
-1
ROIC (%)
16.5
16.3
17.3
18.2
-
-
-
-
Liability to Equity Ratio (%)
37.8
39.2
38.4
34.4
Increase (Decrease) in Cash
-2
3
4
1
Current Ratio (%)
229.3
235.2
248.2
272.6
Beginning Balance
13
12
15
19
Net Debt to Equity Ratio (%)
-22.9
-26.0
-30.0
-32.6
Ending Balance
12
15
19
20
Interest Coverage Ratio (x)
20.4
20.6
23.8
26.3
Source: Company data, KDB Daewoo Securities Research estimates
KDB Daewoo Securities Research
42
Bicycle
June 30, 2015
APPENDIX 1
Important Disclosures & Disclaimers
2-Year Rating and Target Price History
Company (Code)
SAMCHULY(024950)
(W)
Date
Rating
06/30/2015
Buy
Target Price
Company (Code)
Date
Rating
Target Price
31,300
SAMCHULY
40,000
30,000
20,000
10,000
0
Jul 13
Jul 14
Jul 15
Stock Ratings
Buy
Industry Ratings
: Relative performance of 20% or greater
Overweight
: Fundamentals are favorable or improving
Trading Buy : Relative performance of 10% or greater, but with volatility
Neutral
: Fundamentals are steady without any material changes
Hold
: Relative performance of -10% and 10%
Underweight : Fundamentals are unfavorable or worsening
Sell
: Relative performance of -10%
Ratings and Target Price History (Share price (─), Target price (▬), Not covered (■), Buy (▲), Trading Buy (■), Hold (●), Sell (◆))
* Our investment rating is a guide to the relative return of the stock versus the market over the next 12 months.
* Although it is not part of the official ratings at Daewoo Securities, we may call a trading opportunity in case there is a technical or short-term material
development.
* The target price was determined by the research analyst through valuation methods discussed in this report, in part based on the analyst’s estimate of
future earnings.
* The achievement of the target price may be impeded by risks related to the subject securities and companies, as well as general market and economic
conditions.
Equity Ratings Distribution
Buy
Trading Buy
Hold
Sell
71.9%
13.8%
14.3%
0%
* Based on recommendations in the last 12-months (as of March 31, 2015)
Disclosures
As of the publication date, Daewoo Securities Co., Ltd and/or its affiliates do not have any special interest with the subject company and do not own 1% or
more of the subject company's shares outstanding.
Analyst Certification
The research analysts who prepared this report (the “Analysts”) are registered with the Korea Financial Investment Association and are subject to Korean
securities regulations. They are neither registered as research analysts in any other jurisdiction nor subject to the laws and regulations thereof. Opinions
expressed in this publication about the subject securities and companies accurately reflect the personal views of the Analysts primarily responsible for this
report. Daewoo Securities Co., Ltd. policy prohibits its Analysts and members of their households from owning securities of any company in the Analyst’s
area of coverage, and the Analysts do not serve as an officer, director or advisory board member of the subject companies. Except as otherwise specified
herein, the Analysts have not received any compensation or any other benefits from the subject companies in the past 12 months and have not been
promised the same in connection with this report. No part of the compensation of the Analysts was, is, or will be directly or indirectly related to the specific
recommendations or views contained in this report but, like all employees of Daewoo Securities, the Analysts receive compensation that is impacted by
overall firm profitability, which includes revenues from, among other business units, the institutional equities, investment banking, proprietary trading and
private client division. At the time of publication of this report, the Analysts do not know or have reason to know of any actual, material conflict of interest of
the Analyst or Daewoo Securities Co., Ltd. except as otherwise stated herein.
Disclaimers
This report is published by Daewoo Securities Co., Ltd. (“Daewoo”), a broker-dealer registered in the Republic of Korea and a member of the Korea Exchange.
Information and opinions contained herein have been compiled from sources believed to be reliable and in good faith, but such information has not been
independently verified and Daewoo makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness or
correctness of the information and opinions contained herein or of any translation into English from the Korean language. If this report is an English
translation of a report prepared in the Korean language, the original Korean language report may have been made available to investors in advance of this
report. Daewoo, its affiliates and their directors, officers, employees and agents do not accept any liability for any loss arising from the use hereof. This
report is for general information purposes only and it is not and should not be construed as an offer or a solicitation of an offer to effect transactions in any
securities or other financial instruments. The intended recipients of this report are sophisticated institutional investors who have substantial knowledge of
the local business environment, its common practices, laws and accounting principles and no person whose receipt or use of this report would violate any
laws and regulations or subject Daewoo and its affiliates to registration or licensing requirements in any jurisdiction should receive or make any use hereof.
Information and opinions contained herein are subject to change without notice and no part of this document may be copied or reproduced in any manner or
form or redistributed or published, in whole or in part, without the prior written consent of Daewoo. Daewoo, its affiliates and their directors, officers,
employees and agents may have long or short positions in any of the subject securities at any time and may make a purchase or sale, or offer to make a
purchase or sale, of any such securities or other financial instruments from time to time in the open market or otherwise, in each case either as principals or
agents. Daewoo and its affiliates may have had, or may be expecting to enter into, business relationships with the subject companies to provide investment
banking, market-making or other financial services as are permitted under applicable laws and regulations. The price and value of the investments referred to
KDB Daewoo Securities Research
43
Bicycle
June 30, 2015
in this report and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide to
future performance. Future returns are not guaranteed, and a loss of original capital may occur.
Distribution
United Kingdom: This report is being distributed by Daewoo Securities (Europe) Ltd. in the United Kingdom only to (i) investment professionals falling within
Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”), and (ii) high net worth companies and other
persons to whom it may lawfully be communicated, falling within Article 49(2)(A) to (E) of the Order (all such persons together being referred to as “Relevant
Persons”). This report is directed only at Relevant Persons. Any person who is not a Relevant Person should not act or rely on this report or any of its
contents.
United States: This report is distributed in the U.S. by Daewoo Securities (America) Inc., a member of FINRA/SIPC, and is only intended for major institutional
investors as defined in Rule 15a-6(b)(4) under the U.S. Securities Exchange Act of 1934. All U.S. persons that receive this document by their acceptance
thereof represent and warrant that they are a major institutional investor and have not received this report under any express or implied understanding that
they will direct commission income to Daewoo or its affiliates. Any U.S. recipient of this document wishing to effect a transaction in any securities discussed
herein should contact and place orders with Daewoo Securities (America) Inc., which accepts responsibility for the contents of this report in the U.S. The
securities described in this report may not have been registered under the U.S. Securities Act of 1933, as amended, and, in such case, may not be offered or
sold in the U.S. or to U.S. persons absent registration or an applicable exemption from the registration requirements.
Hong Kong: This document has been approved for distribution in Hong Kong by Daewoo Securities (Hong Kong) Ltd., which is regulated by the Hong Kong
Securities and Futures Commission. The contents of this report have not been reviewed by any regulatory authority in Hong Kong. This report is for
distribution only to professional investors within the meaning of Part I of Schedule 1 to the Securities and Futures Ordinance of Hong Kong (Cap. 571, Laws
of Hong Kong) and any rules made thereunder and may not be redistributed in whole or in part in Hong Kong to any person.
All Other Jurisdictions: Customers in all other countries who wish to effect a transaction in any securities referenced in this report should contact Daewoo or
its affiliates only if distribution to or use by such customer of this report would not violate applicable laws and regulations and not subject Daewoo and its
affiliates to any registration or licensing requirement within such jurisdiction.
KDB Daewoo Securities International Network
Daewoo Securities Co. Ltd. (Seoul)
Head Office
34-3 Yeouido-dong, Yeongdeungpo-gu
Seoul 150-716
Korea
Tel: 82-2-768-3026
Daewoo Securities (Hong Kong) Ltd.
Two International Finance Centre
Suites 2005-2012
8 Finance Street, Central
Hong Kong, China
Tel: 85-2-2845-6332
Daewoo Securities (America) Inc.
320 Park Avenue
31st Floor
New York, NY 10022
United States
Tel: 1-212-407-1000
Daewoo Securities (Europe) Ltd.
41st Floor, Tower 42
25 Old Broad St.
London EC2N 1HQ
United Kingdom
Tel: 44-20-7982-8000
Daewoo Securities (Singapore) Pte. Ltd.
Six Battery Road #11-01
Singapore, 049909
Tel: 65-6671-9845
Tokyo Branch
7th Floor, Yusen Building
2-3-2 Marunouchi, Chiyoda-ku
Tokyo 100-0005
Japan
Tel: 81-3- 3211-5511
Beijing Representative Office
2401A, 24th Floor, East Tower, Twin Towers
B-12 Jianguomenwai Avenue
Chaoyang District, Beijing 100022
China
Tel: 86-10-6567-9299
Shanghai Representative Office
Room 38T31, 38F SWFC
100 Century Avenue
Pudong New Area, Shanghai 200120
China
Tel: 86-21-5013-6392
Ho Chi Minh Representative Office
Suite 2103, Saigon Trade Center
37 Ton Duc Thang St,
Dist. 1, Ho Chi Minh City,
Vietnam
Tel: 84-8-3910-6000
Daewoo Investment Advisory (Beijing) Co., Ltd.
Daewoo Securities (Mongolia) LLC
PT. Daewoo Securities Indonesia
2401B, 24th Floor, East Tower, Twin Towers
B-12 Jianguomenwai Avenue,
Chaoyang District, Beijing 100022
China
#406, Blue Sky Tower, Peace Avenue 17
1 Khoroo, Sukhbaatar District
Ulaanbaatar 14240
Mongolia
Equity Tower Building Lt.50
Sudirman Central Business District Jl.
Jendral Sudirman Kav. 52-53, Jakarta Selatan
Indonesia 12190
Tel: 86-10-6567-9699
Tel: 976-7011-0807
Tel: 62-21-515-1140
KDB Daewoo Securities Research
44