COMEFLY OUTDOOR(603908)：BENEFITING FROM THE CAMPING BOOM

　　Core views:
　　Comefly is a leading domestic outdoor products company with steady growth in the original equipment manufacturing (OEM) business and rapid expansion in own brands, benefiting from the glamping boom since 2020. Based on the history of the rapid growth of Japan's camping industry in the 1980s, we believe that China's camping industry has established a foundation for sustained growth, with emerging drivers on both the demand and supply side and throughout channels, while Covid-19 induced demand has created a rewarding period for the industry. In the future, Comefly may extensively cover all market tiers with its rich product lines and carry out crossover co-branding and marketing in an effort to polish its image as a top outdoor brand. We expect the outdoor and camping industry to maintain high growth and Comefly to fully benefit from its current leading position. We initiate coverage with a "BUY" rating.
　　Abstract:
　　A tent OEM with fast-growing own-brand business driven by the camping boom.
　　The predecessor of Comefly was founded in 2001 as a tent OEM for overseas brands. The Company captured the domestic outdoor camping boom and launched its own brand "Mobi Garden" in China, covering both the outdoor equipment series and the urban clothing series, and expanded its tent production capacity at home and abroad. In 2007, it successfully listed on the main board of the Shanghai Stock Exchange (SSE) and its OEM business has been growing steadily since then. Its own brands have benefited from the glamping boom since 2020, ushering in significant growth. The Company increased glamping product development, launched co-branding and other youthful designs, extended to outdoor furniture and other equipment products, and conducted marketing activities such as cooperating with Xiaohongshu (a Chinese social media and ecommerce platform), campgrounds, car brands, etc. In 1H22, driven by the increase of 182% YoY in revenue from its own-brand business, Comefly's revenue/net profit grew by 61%/112% YoY, respectively.
　　Business segments: Accelerated development of own-brand business helps improve profitability.
　　Comefly is currently engaged in OEM/ODM and own-brand business. All the products of the OEM business are exported and the major customers include well-known overseas outdoor brands. The own-brand business is divided into outdoor equipment and urban clothing. In 2021, the gross profit margin (GPM) of the Company's overall/OEM business/own brands was 24.8%/2034%/ 33.9%, respectively. With the rapid growth of own brands and proper cost control, the Company's net profit margin (NPM) continues to improve. By segment, the own-brand business accounted for 40% of the total revenue in 2H22. By product, tents and outdoor equipment are the core products, accounting for 84% of the total revenue in 2021. By region, sales in the Chinese mainland accounted for 33% in 2021 driven by the high boom of glamping in China.
　　Outdoor products industry: Global market grows steadily, and new demand drives the domestic market to regain growth.
　　According to Statista, the global outdoor products industry revenue reached US$159.95bn (+28% YoY) in 2020. The pandemic has released new demand for outdoor products, and the industry has achieved relatively fast growth which may lead to a CAGR of 7% over the next five years. After the initial rapid growth of the domestic market, it entered a period of steady development in 2013, and the camping boom is likely to drive the market scale to grow again. At the same time, domestic manufacturers enjoy significant advantages in the upstream/midstream of the supply chain. Barriers for upstream players are built through technology & brand advantages, bringing sustained high profit margin for them. Large-cap outdoor companies are mostly brand owners whose downstream end-consumer market embraces broad demand and continues to grow through category expansion and global expansion.
　　Future development: Supply and demand lay the foundation for high growth. Covid-19 induced demand creates "added bonus".
　　Based on the history of the rapid growth of Japan's camping industry in the 1980s, we believe the catalysts for the high growth of Japan's camping industry-including the economic base, population, social attitude changes and other factors-have shown up in the domestic industry. At the same time, we believe that the corresponding drivers on both the demand and supply side and throughout channels have all emerged, laying the foundation for sustained growth. Covid-19 induced demand has just entered a rewarding period. For example, on the demand side, the Generation Z chases the popular trend of camping and the post-80s becomes the major participants of camping activities for child nurturing demand after education reform. In terms of media and channels, through the new communication media such as Xiaohongshu and Douyin, key opinion leaders (KOL) can fully demonstrate the exquisite camping experience. On the supply side, before the camping boom in 2020, the number of campsites and related enterprises in China have been accumulated, which can quickly provide "camping +" and other new ways to play. In addition, as one of the world's major OEM markets for camping equipment, China has a strong industry chain that can quickly boost the supply of camping-related products.
　　Competitive advantages: With balanced product function & design, Comefly's own brands show strong growth momentum.
　　Comefly's products are positioned at the mid-/high-end market. It achieves a wide coverage of the price range through product series of Leng Shan/Jiyuan/ co-branding/Lansheng. With high quality, attractive appearance and competitive price, Comefly's products are well-received by consumers. The Company also actively devoted to crossover co-branding and marketing in an effort to polish its image as a top outdoor brand. At present, tent product search words are still predominantly category terms, and the Company's brand name "Mobi Garden" ranked first in mention rate, implying first-mover advantage. In terms of supply chain, the Company is capable of independent production capacity to undertake OEM/ODM business and its product development & response speed are taking the lead, which outperforms the overseas high-end brands & brands developed via Taobao.
　　Potential risks: OEM business affected by overseas demand downtrend; own brands failing to grasp the trend; intensified outdoor products industry competition; impaired demand by the repeated Covid flare-ups; a too high proportion of sales from key customers; less-than-expected new brand development; disappointing offline store expansion.
　　Investment strategy: Comefly's overall OEM business is growing steadily, and its own brands are benefiting from the glamping boom since 2020. At present, the Company has enhanced its glamping product development, launched co-branded and other youthful designs, expanded outdoor furniture and other equipment products, and conducted marketing activities such as cooperating with Xiaohongshu, campgrounds, car brands and so on. We expect the outdoor and camping industry to maintain high growth in the future and Comefly stands well to fully benefit from the current leading position. We put our 2022E/23E/24E EPS estimates at Rmb2.85/3.76/4.95. Using the sum-of-the-parts valuation (SOTP) approach, we value the own-brand and OEM segments at Rmb7.32bn, implying a target price of Rmb110. We initiate coverage with a "BUY" rating.
【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。

   【免责声明】本文仅代表第三方观点，不代表和讯网立场。投资者据此操作，风险请自担。