Future Upgrades by New Cyclists From Pandemic Will Drive Shimano’s Growth After Headwinds

Shimano’s 7309 December-quarter revenue grew 6.6% year on year, exceeding our forecasts of an 8.8% decline, as demand for high-end bicycles and e-bikes in Europe was resilient, amid a slowdown in the overall bicycle market. Despite the strong results, we expect an economic slowdown will cause bicycle frame manufacturers and retailers to reduce their excess inventories. As such, we project a companywide revenue decline of 18.1% year on year in 2023.

While we lower our fair value estimate to JPY 27,500 from JPY 29,000, we remain bullish on Shimano’s long-term revenue growth, driven by future bicycle upgrades from the influx of new cyclists during the pandemic and higher adoption of e-bikes, which the market is underestimating.

We now project Shimano’s bicycle component segment sales to decline 20.5% year on year in 2023, revised from 8.5% decline previously, factoring in a larger-than-expected impact from inventory correction. We expect segment sales in the company’s largest market, Europe, to decline by about 23% year on year, which is in line with guidance. Looking into 2024, we expect sales to rebound, as the market inventory reverts to appropriate levels and Shimano’s customers take in new products/models. According to management, while the entire supply chain is suffering from excess inventory, high-end road/e-bike inventory levels have remained lower, especially in Europe. With firm demand in these areas, we expect sales in the region to remain well above prepandemic levels. In the medium term, we project segment sales to grow at 7.5% CAGR between 2023 and 2027.