On AG(US:ONON) Southwest Securities·2024-10-24 07:42Investment Rating - The report assigns a positive investment rating to On (ONON.N), highlighting its strong growth potential in the running shoe market [1]. Core Insights - On has rapidly expanded in the running shoe segment, achieving a remarkable revenue growth from 270 million CHF in 2019 to 1.79 billion CHF in 2023, with a CAGR of 60% [2][14]. - North America is the primary revenue contributor, accounting for 65% of total sales, while the Asia-Pacific region, although only 10% of total revenue, has shown exceptional growth, with a 89% year-on-year increase in 2023 [2][17]. - The company focuses on high-end running shoes, with over 90% of its revenue coming from this category, while also expanding into apparel and accessories [2][20]. Summary by Sections Company Overview - On was founded in 2012 and has established itself as a rising star in the running shoe industry, with a product line that includes high-performance running shoes and apparel [5]. - The company has seen significant growth, with a revenue of 510 million CHF in the first half of 2024, reflecting a 21% year-on-year increase [14]. Market Dynamics - The global athletic footwear market is projected to grow from 133.2 billion USD in 2023 to 197.1 billion USD by 2033, with a CAGR of approximately 4% [33]. - The Asia-Pacific region leads the market, accounting for 36% of the global share, while North America holds 29% [33]. Competitive Landscape - The U.S. athletic footwear market is highly concentrated, with Nike holding a 27% market share, followed by other brands like Skechers and Under Armour [38]. - On's unique positioning in the running shoe segment, combined with its high-quality products and community marketing strategies, allows it to target a specific demographic of high-income consumers [3][4]. Financial Performance - On's revenue has shown robust growth, with a significant increase in net profit and a stable gross margin maintained between 50% and 60% [23][14]. - The company has effectively utilized direct-to-consumer (DTC) channels, which accounted for 37% of total revenue in Q2 2024, enhancing customer engagement and brand loyalty [18][29]. Product Strategy - Running shoes constitute 96% of On's revenue, with a year-on-year growth of 27% in Q2 2024 [20]. - The company emphasizes both functionality and style in its products, appealing to consumers who prioritize performance and aesthetics [3][45].