ShuHua Sports IPO

On December 2, China’s sporting goods industry will usher in another A-share listed company, from jinjiang sporting goods manufacturer ——- —- Shuhua Sports (605299.sh).
Shuhua was listed on the New Third Board in 2016. Shuhua first submitted a-shares share offer book to the CSRC in the second half of 2018. But for a variety of reasons, the company chose to terminate the IPO voluntarily. In May 2019, Shuhua applied for an IPO again.
In this IPO, Shuhua intends to issue no more than 50 million shares, and the total share capital of the company shall not exceed 411,499,900 shares after issuance. The number of publicly issued shares shall not exceed 12.1507% of the total share capital of the company after issuance.

Company information

Shuhua Sports ,founded in 1996.It is mainly engaged in the production and sales of indoor fitness equipment, outdoor fitness paths and show racks. It has four production bases and two operation centers (Shanghai and Quanzhou), with a total scale of 450,000 square meters. The company has 2,460 employees; It has established nearly 1,000 online and offline sales and service integration channels, and its global business covers more than 60 countries and regions including Europe, America, the Middle East and Southeast Asia.

Issuer

As a sponsor institution of CITIC Securities, liang Yong and Li Liang, the sponsor representatives, are senior staff of Citic Securities and have participated in the INITIAL public offering projects of Jiu Muwang, Xi linmen, Feike Electric, Zhang Xiaoquan and other companies.

Equity structure

According to the equity structure chart, the controlling shareholder is Shuhua Investment Co., LTD. (accounting for 73.85% of Shuhua Sports Co., LTD.), followed by the major shareholder is Nyingchi An University (accounting for 5.75% of Shuhua Sports Co., LTD.), who holds more than 5% of the shares. The actual controller of Nyingchi An University is also the actual controller of Anta Sports.

Financial analysis

Total assets & Profit marginTotal assets increased by 73% from 922 million in 2014 to 1.595 billion in 2019Net profit rose 68% from 87.24 million yuan in 2014 to 147 million RMB in 2019

Gross profit margin

During the reporting period, the company’s comprehensive gross margin was 42.65%, 43.02%, 39.98%, 40.3%, compared with the average gross margin of the peers of 39.78%,
At the end of each report period, the company’s liquidity ratios (suitable between 1.5 and 2.0) were 1.39,1.25,1.17 and 1.14 respectively, and the quick-freeze ratios (suitable for quick ratio 1) were 1.08,0.94.085 and 0.79 respectively, indicating that the company’s assets have certain liquidity and liquidity ability and meet short-term debt repayment requirements.


Solvency (asset-liability ratio)At the end of the reporting period, the asset liability ratio of the company (the general asset liability ratio of manufacturing enterprises is appropriate for higher than 50%) is 47.47%, 46.78%, 43.93,43.31%.

Business composition

Fitness equipment

Income analysis of indoor fitness equipmentDuring the reporting period, the company’s sales revenue of indoor fitness equipment was 520,33.35 million RMB, 509,23.49 million RMB, 572,73.45 million RMB, 29,731.23 million RMB. Accounting for 49.47%, 45.39%, 49.07%, 54.13% of the business composition.

Sales revenue generally showed a slow upward trend.
Outdoor fitness path income analysisDuring the reporting period, the revenue of outdoor route sales was 229,18.79 million RMB, 291,20.66 million RMB, 20516.76 million RMB, 95,52.05 million RMB, accounting for 21.79%, 25.95%, 17.58%, 17.39% of the total business composition. Sales revenue as a whole showed a slow downward trend.


Show rackDuring the reporting period, the company’s display products revenue was 302,39.34 million RMB, 32157.44 million RMB, 38929.32 million RMB, 15637.89 million RMB, accounting for 28.75%, 28.66%, 33.35%, 28.47% of the heavy business composition. Sales revenue generally presents a fluctuating trend.


Generally speaking, in the business composition of Shuhua Sports, the sales revenue of household products accounts for more than 50%, showing a unique momentum, while display racks and outdoor paths account for the same proportion, both fluctuating around 25% of the total sales revenue.

Industry trends

According to the China Sports Goods Development Report, from 2011 to 2017, the total output value of China’s fitness equipment industry rose from 27.5 billion RMB to 38.2 billion RMB, showing a growing momentum. But it is not hard to see that the scale of China’s fitness equipment manufacturing industry, compared with other industries in China, is relatively small. The main reasons are as follows:

  1. The fitness market is slow to take offMainly subject to economic development, currently the more developed countries in the fitness market are generally Europe, the United States and other earlier countries and regions. As an emerging market, China has a large population, so there will be a huge demand.
  2. Fitness is not a necessityUnlike daily chemical products, fitness products are not life necessities. So fitness products in the household consumption is relatively small. But in the wake of the pandemic, the frenzy of demand for fitness products will have a greater impact on household consumption.
  3. Low repurchase rateThe market requirements for fitness products are beautiful price and high quality, coupled with the characteristics of low frequency of use, the repurchase rate of fitness products will be relatively low.

Industry outlook
With Shuhua sports’ IPO success, there are now three A-share listed Chinese sporting goods manufacturers. These head enterprises will certainly lead the development of the industry, and there will be more and more sporting goods manufacturing enterprises in China’s A shares.