According to a report from FIRST SHANGHAI, the firm has assigned a "Buy" rating to GOODBABY INTL (01086), setting a target price of HKD 1.85. Cybex, recognized globally as a premium brand, is the core asset and primary profit source driving growth for the group. Although Evenflo and gb are presently facing transitional challenges, the group has made corresponding adjustments; it is believed that the worst is behind for these two businesses, and improvements will gradually follow. Additionally, the group has resumed dividend payouts to shareholders, further highlighting its competitive advantages and future growth prospects.
The key points from FIRST SHANGHAI are as follows: GOODBABY INTL is a leading global producer of baby products, driven by three core strengths: safety, innovation, and high quality, which position it at the forefront of the industry. The company's extensive portfolio not only dominates key product areas such as strollers and children's car safety seats but has also expanded into diverse fields like baby furniture, carriers, apparel, and other related products, creating a diversified product matrix.
The group holds strategic brands including Cybex (the top brand in Europe), Evenflo (ranking second in the car seat category in the US), and gb (a leader in the domestic market), covering all price ranges and age segments to meet diverse market demands. Cybex continues to show strong performance in 2024 with record annual revenue reaching HKD 4.4 billion, accounting for 51% of total revenue. As a globally recognized premium brand, Cybex boasts a gross margin of over 50%, serving as the group's critical asset and primary source of growth and profit.
Cybex is focused on increasing its global market share, with approximately 30% of the market in Europe while also deepening its presence in Japan and expanding into other promising markets (including the Middle East, North America, and China) while introducing new product lines like furniture and carriers to sustain rapid growth. The gb brand is undergoing a brand transformation, and while its domestic business has seen declines in recent years due to various internal and external factors, it is projected to gradually recover.
By the first half of 2025, the self-operated offline channels have achieved positive growth, and the online business has shown improvement, with notable increases in gross margins (benefiting from the group's channel optimization strategies and price stabilization initiatives). Performance in the Chinese market is expected to continue improving, aiming to transition from losses to profits.
The group resumed dividend payouts, returning value to shareholders. In 2024, GOODBABY INTL’s revenue grew by 10.6% year-on-year to HKD 8.77 billion, primarily benefiting from growth in Europe/other regions and CYBEX/premium business. Operating profit and shareholders' net profit rose by 35.7% and 74.9% to HKD 500 million and HKD 360 million, respectively, thanks to improvements in gross margins. The group's operating cash flow remains robust, with plans to restructure loans and further reduce debt, significantly optimizing financial costs. Consequently, the group has announced a dividend of HKD 0.07 per share (equating to a payout ratio of 33.3%), reflecting its commitment to returning value to shareholders.
Risks include: 1) macroeconomic impacts, 2) tariff influences, 3) exchange rate fluctuations, and 4) lower-than-expected demand in the US market.