Founder, Riedel Research

David Riedel

Founder

Independent equity research on GEM Markets

Riedel Research

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Equity Bottom-Up

Goodbaby International Hldg / Equity Bottom-Up

<ul><li>Through a series of acquisitions in recent years and organic growth Goodbaby is the largest supplier of strollers in US, Europe and China and the largest baby products producer and retailer in China.</li><li>As the company has shifted from OEM to a focus on their own brands revenues have declined but margins are up.</li><li>Revenues declined 12% YOY in 1H16 but operating profits increased 50% YOY in 1H16.</li><li>We believe the transition from OEM to a focus on their own brand will lead to higher margins.</li><li>We also believe the closure of non-core low-margin businesses in China is a correct decision.</li><li>We assume revenues will grow 13% in 2017 versus a decline of 4% in 2016, as we believe its transition to own brands is successful</li><li>We also assume the operating margin will improve to 8.5% in 2017 versus 5.5% in 2016.</li></ul>

Through a series of acquisitions in recent years and organic growth Goodbaby is the largest supplier of strollers in US, Europe and China and the largest baby products producer and retailer in China.As the company has shifted from OEM to a focus on their own brands revenues have declined but margins are up.Revenues declined 12% YOY in 1H16 but operating profits increased 50% YOY in 1H16.We believe the transition from OEM to a focus on their own brand will lead to higher margins.We also believe the closure of non-core low-margin businesses in China is a correct decision.We assume revenues will grow 13% in 2017 versus a decline of 4% in 2016, as we believe its transition to own brands is successfulWe also assume the operating margin will improve to 8.5% in 2017 versus 5.5% in 2016.

Goodbaby – Higher Margins and Business Model Transition Offset Lower Revenues – 100%+ Upside - BUY