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China Textiles &Footwear:Positive read-across from Regin

文章作者:股票基金 上传时间:2019-10-17

    Net profit was down 78% on the back of 8% decline in revenue. Full year dividend ofHKD2.5cents represents a payout of c31%. After a tough 1H FY17e where earningswere down 89% on the back of a 14% decrease in revenue, Regina Miracle saw arebound in both orders and margins during 2H FY17. On a h-o-h basis, 2H FY17revenue was up 18%, GPM was up 1.6ppt and net margin up 1.8ppt.

    We prefer Shenzhou (2313 HK, Buy, CMP HKD50.70, TP HKD56.80) for its stronggrowth outlook thanks to its strong customer profile and margin expansion, drivencollectively by enhancing product mix, further ramp-up of Vietnam production andfavourable FX conditions. We expect earnings to grow at a 20% CAGR during FY17-18e, twice the peer group average of 10%. We have Hold ratings on Yue Yuen (551HK, CMP HKD32.05, TP HKD32.60) and Pacific Textiles (1382 HK, CMP HKD8.71,TP HKD9.20). We rate Stella (1836 HK, CMP HKD13.80, TP HKD10.00) Reduce aswe see a slower-than-expected margin recovery in 2017 on a lower ASP and newfactorymargin dilution.

Regina Miracle (2199 HK, non-rated) reported FY17 (YE: March) results on 28 June.

    Positive for Pacific Textiles and Shenzhou. Regina Miracle management areconfident about the company’s prospects as they have strong research anddevelopment capabilities to benefit from the raising trend of seamless intimate wear,sports apparel and bras. They have added three international clients over the pastnine months. On existing customers, they commented positively on order growth fromL Brands (LB US, non-rated) after inventory clearance and a change in strategystarted to bear fruit at Victoria’s Secret. We believe that reads positively for PacificTextiles, which is an upstream supplier to L Brands with c10% of sales exposure.

    Separately, Best Pacific (2111 HK, non-rated) is another HK-listed sports fabricproducer for L Brands with c20% sales exposure. Regina Miracle also saw anencouraging trend from Puma (PUM GR, EUR339.95, Hold, TP EUR360, covered byAnne-Laure Bismuth), which benefits from strong product offering and better brandreception. In our view, that reads positively for Shenzhou, which is another sportsapparel supplier to Puma.

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