Textile And Garment Industry: Taking History As A Mirror To See The Possible Direction Of The Textile Leading Stock Price From The Market Performance Before And After The Financial Crisis.

Core view:

Ru hung: a well-known vertically integrated knitted fabric and garment manufacturer in Taiwan. The company mainly provides knitted fabrics and garments for international clothing brands such as Nike, UA, lululemon and target. The business links include fabric weaving, dyeing and finishing, finalization and garment manufacturing. At present, there are many garment and fabric factories in Taiwan, Vietnam and Kampuchea, and Indonesia weaving and garment factory construction. 2019, revenue / net profit of 281.3/43.0 billion, up from +2.0%/-1.8%, and knitted fabric / garment income was about 30%/70%.

Compound 2008: during the financial crisis, the company's stock price underwent several rounds of adjustment. After the financial crisis, the market value of the company's performance was all high. 2008 to date, the company has the lowest market value of NT $1 billion 570 million, up to NT $134 billion 450 million. During the financial crisis, the company's performance and share price have been adjusted, and both performance and market performance have been leaped after the financial crisis. In the three stages before, during and after the financial crisis, the change of market value, performance and valuation can be divided into: before the financial crisis:

Steady growth in performance and valuation in the rising range. The company's product competitiveness is strong, business scale expansion, 2005-2007H1 performance steady growth. This stage of performance and valuation double rise (PE (TTM) increased from 7 to 10), driving the company's share price upward. In the financial crisis, the stock price is adjusted before the performance, and after the performance is bottomed out. Based on the two performance release time in 2008, the company's stock price adjustment can be divided into three stages: (1) valuation is prior to performance adjustment (PE (TTM) center from 10 to 8) (2) valuation and performance double kill (PE (TTM) further decline to 6), the adjustment is aggravated (3) after the bottom of the industry performance, the stock price is further adjusted to the bottom interval (PE (TTM) index distortion). After the financial crisis, valuations have been gradually restored, and the valuation rise has been double hit after a record high performance. According to the 2010 H1 performance disclosure time, the company's market performance after the crisis can be divided into two stages (1) valuation, performance recovery driving stock price upwards (PE (TTM) repair to 10, return to the level before financial crisis); (2) revenue and return to net profit is high, and performance evaluation achieves double hit (high performance, PE (TTM) central to 16 or so).

Investment advice. Through the market performance of Ru hung in the 2007-2010 year period, we can find that although the company's performance and share price have undergone some adjustment during the financial crisis, the core competitiveness of the company has not changed. Once the downstream gets warmer, the company's performance and share price will rise rapidly or even hit a new high. In 2020, influenced by the global spread of the new crown disease epidemic, clothing brands have been shut down, and the downstream brand retail and upstream textile manufacturing of textile and garment industry have been hit hard. However, we believe that for the enterprises with long-term core competitiveness, the impact of the global spread of the epidemic on the industry is also dangerous. It is recommended that Shenzhou International and strong group: Shenzhou International is the world's largest vertically integrated knitting manufacturer. It has formed close cooperation with Nike, Adidas, UNIQLO, PUMA and other brands. The company has strong research and development and technology accumulation, and has a high degree of automation. At present, both domestic and Southeast Asian Vietnam and Kampuchea have built production bases, and the capacity expansion plan is clear in the next three years. The main products of Jian Sheng group include cotton socks and seamless garments. It has long-term cooperation with PUMA, UNIQLO, Decathlon and other global brands. It occupies a relatively high level in the main brand customer related product category suppliers. At present, both domestic and Vietnamese have production bases, and there is a continuous expansion plan for overseas production of cotton socks and seamless garments. For textile manufacturers, short-term changes in customer orders may have a certain impact on the company's performance in the short term. But in the long run, the epidemic will eventually pass away, and the company will benefit directly from the brand sales growth and the withdrawal of low-end manufacturing capacity, and the industry will continue to consolidate its position. In terms of market performance, stock prices may still fluctuate in the short term due to performance fluctuations, but in the medium and long term, with the end of the global epidemic, the industry concentration will be improved, and the company's performance will grow faster.

Risk warning. The global epidemic continues to spread, the macroeconomic environment is highly volatile, and overseas production capacity is less than expected risk; exchange rate volatility risks.