2021-12-19 Tianfeng Securities Co., Ltd. Li Lujing and Sun Xiaoya studied Jiuqi shares and issued a research report "from ODM to independent brands, accelerating growth by electric bikes". This report gives a buy rating of Jiuqi shares, which is considered to be a target price of 69.60 yuan, while the current stock price is 51.24 yuan, with an expected increase of 35.83%.

Jiuqi shares (300994)
Characteristics of the industry: the pattern is loose, and electric bikes are sparkling, becoming a new growth point.
The global demand for bicycles is about 120 million, and the market size is expected to be about 280 billion yuan. The industry structure is loose, Giant Machinery is a world-famous bicycle manufacturer, accounting for about 3.7% of sales in 2020. The reasons for low concentration are: 1) high degree of product personalization (such as application scenarios, brand preferences, purchasing power, etc.) 2) bicycle standards vary from country to country.
Analogous to electric cars, electric bikes bring new increments to the bicycle industry. Europe: 4.537 million electric bikes were sold in 2020, with a compound growth rate of 27% from 2015 to 2020. Us: sales of about 50-600000 vehicles in 2020, double that of the same period last year. Electric bikes in the United States are in the early stages of development, and with the landing of the regulations on electric bikes, the growth rate of electric bicycles is expected to reach 50% in the next three years.
Light asset operation, focusing on design, brand and channel
Although bicycles belong to the manufacturing industry, they have the attribute of consumer goods, and brands and channels are an important moat. From the point of view of the composition of the three fees of Jiuqi and giant machinery, the cost of sales is much higher than that of management and research and development. Although Giant Machinery is a relatively mature brand, the sales expense rate is still high, with the sales expense rate reaching 9.3% in 2020, much higher than the management expense rate of 2.6% and the R & D expense rate of 1.3%.
Jiuqi is well aware of the characteristics of the industry, focusing on design and development, brand, channel construction and other key links, light asset operation, outsourcing production, supplemented by independent production.
The focus of Jiuqi's growth: expanding products, new channels & increasing the proportion of independent brands
Rubbings: Jiuqi extends from adult cars and strollers to electric bikes. In 2020, the average unit price of Jiuqi electric car is 1613 yuan, which is 3.6 times that of adult car and 6.8 times that of children's car. The ASP of electric scooters is much higher than that of adult cars and strollers, which can bring greater performance flexibility to the company.
New channels: compared with offline consumption, online consumers pay more attention to variety and praise rate, which provides the possibility for new brands to cut into consumers. The online gross profit margin is much higher than offline, and the online and offline gross profit margins of children's carriages in 2020 are 74.1% and 16.7% respectively.
Independent brands: from 2018 to 2020, OBM accounted for 10%, 11% and 16% of the company's revenue, respectively. The company has its own brands such as Hiland and Joystar, and is well-known in North America. Self-owned brands directly face the end consumers, do not need to go through the brand merchants, contract manufacturers and other links, can get a higher gross profit margin.
Giant Machinery, Merida's growth path: from OEM to its own Brand, focusing on the High-end Market
Giant Machinery and Merida started from OEM in the early days, accumulating production, R & D and other capabilities, and Jiuqi's growth path is similar. Giant Machinery uses its own brand + direct sales model, Merida adopts a joint venture + distribution model, and electric bikes have brought the performance of the two companies back to high growth after 2017.
At present, the strategy of Jiuqi is close to that of Giant Machinery, and it adopts multi-brand development strategy for different markets and people. In terms of ODM, Jiuqi also accumulated deep, ODM, private brand is expected to become Jiuqi development of twin engines, trolley is also expected to significantly increase the profit level.
Profit forecast and valuation
For a long time, we have seen the expansion of Qi's product category, the layout of new channels and the increase in the proportion of its own brands. Looking at 2025, we expect that Jiuqi electric bike sales are expected to reach 15-2 million units, contributing 300 million yuan in net profit, with broad room for medium-and long-term growth. It is estimated that the net profit of returning to the mother in 21 and 22 years is 2.1 billion yuan and 300 million yuan. Given 2022 PE45X, corresponding to the share price of 69.6 yuan, the first coverage, given a "buy" rating.
Risk tips: private brand development is not as expected, the demand of the bicycle industry has dropped sharply, shipping costs remain high, trade frictions, product sales are not as expected, and so on.

The stock has been rated by eight agencies in the last 90 days, including 6 buy ratings and 2 overweight ratings; the average institutional target price in the past 90 days is 58.29; according to the Securities Star valuation analysis tool, Jiuqi shares (300994) has a rating of 3.5 stars, a good price rating of 0.5 stars, and a comprehensive valuation rating of 2 stars. (rating range: 1-5 stars, up to 5 stars)