Garment and fabric supplier Eclat Textile Co (儒鴻) on Monday reported better-than-expected revenue of NT$3.7 billion (US$129.9 million) for last month, up 48.4 percent month-on-month and 35.6 percent year-on-year, as the work-from-home trend and people exercising more amid the COVID-19 pandemic spurred sales of casual clothing and leisure wear.
Driven by restocking demand, revenue increased for a fourth straight month last month and hit a new high, analysts said.
That brought Eclat’s quarterly revenue to NT$9.33 billion, up 26.5 percent quarterly and 20.5 percent annually, beating Jih Sun Securities Investment Consulting Co’s (日盛投顧) estimate of NT$8.19 billion.
Photo: Bloomberg
Although the pandemic initially led to a 13.07 percent annual drop in revenue in the first half of last year, recovering demand, rush orders and new clients lifted sales in the second half, allowing full-year revenue to edge up 0.18 percent to a record NT$28.18 billion.
Analysts said that given container shortages, Eclat’s booking of NT$300 million in sales was delayed from November to last month, while recognition of another NT$400 million in sales would also be delayed from last month to this month.
Given the positive outlook for the company’s orders in the first half of this year, coupled with two major clients revising up their sales estimates for this quarter and improved US apparel retail sales in the past few months, Jih Sun on Monday said it was maintaining its “buy” rating on Eclat shares, with a target price of NT$480.
Yuanta Securities Investment Consulting Co (元大投顧) also retained its “buy” rating on Eclat shares, but raised its target price to NT$535 from NT$480.
“We expect double-digit sales growth for Eclat in 2021 and 2022, with growth returning to the upcycle levels seen in 2013-2015,” Yuanta said in a note on Monday.
“This is mainly due to brand and channel clients accelerating supplier concentration amid the [COVID-19] pandemic, with Eclat seeing continued order growth from Nike Inc and Lululemon Athletica Inc, as well as transferred orders from Target Corp, given its healthy financial structure and large, flexible capacity,” the note said.
Sales to Nike and Lululemon are expected to account for 15 to 16 percent and 8 to 10 percent of its overall sales this year, while Target and Under Armour Inc would make up more than 5 percent each, Yuanta said, adding that the top four clients’ contribution would rise to 40 percent this year from 30 percent last year.
As 90 to 100 percent of Eclat’s sales and 70 to 80 percent of its operating costs are denominated in US dollars, the appreciation of the New Taiwan dollar would affect Eclat’s gross margin, but this is expected to be offset by the company’s improved product mix, expanding economies of scale and average selling price adjustments, Yuanta said.
Eclat shares yesterday rose 2.29 percent to close at NT$425 in Taipei trading.
HANDOVER POLICY: Approving the probe means that the new US administration of Donald Trump is likely to have the option to impose trade restrictions on China US President Joe Biden’s administration is set to initiate a trade investigation into Chinese semiconductors in the coming days as part of a push to reduce reliance on a technology that US officials believe poses national security risks. The probe could result in tariffs or other measures to restrict imports on older-model semiconductors and the products containing them, including medical devices, vehicles, smartphones and weaponry, people familiar with the matter said. The investigation examining so-called foundational chips could take months to conclude, meaning that any reaction to the findings would be left to the discretion of US president-elect Donald Trump’s incoming team. Biden
INVESTMENT: Jun Seki, chief strategy officer for Hon Hai’s EV arm, and his team are currently in talks in France with Renault, Nissan’s 36 percent shareholder Hon Hai Precision Industry Co (鴻海精密), the iPhone maker known as Foxconn Technology Group (富士康科技集團) internationally, is in talks with Nissan Motor Co’s biggest shareholder Renault SA about its willingness to sell its shares in the Japanese automaker, the Central News Agency (CNA) said, citing people it did not identify. Nissan and fellow Japanese automaker, Honda Motor Co, are exploring a merger that would create a rival to Toyota Motor Corp in Japan and better position the combined company to face competitive challenges around the world, people familiar with the matter said on Wednesday. However, one potential spanner in the works is
HON HAI LURKS: The ‘Nikkei’ reported that Foxconn’s interest in Nissan accelerated the Honda-merger effort out of fears it might be taken over by the Taiwanese firm Nissan Motor Co has become the latest buyout target in Japan as it explores a merger with Honda Motor Co and faces an overture from Hon Hai Precision Industry Co (鴻海精密), known as Foxconn Technology Group (富士康科技集團) internationally. Shares in Nissan yesterday jumped 24 percent, the most on record, to hit the daily limit, after the two Japanese automakers acknowledged that talks are ongoing to better position themselves for competitive challenges during a time of upheaval in the global auto industry. Foxconn — a Taipei-based manufacturer of iPhones, which has been investing heavily in factories to build electric vehicles — has also
CHIP SUBSIDY: The US funding would help alleviate the financial pressure from building two fabs in the US and should lift gross margins in 2026, the company said GlobalWafers Co (環球晶圓), the world’s third-largest silicon wafer supplier, yesterday said it is to receive US$406 million in subsidies from the US Department of Commerce for two new US fabs under the CHIPS and Science Act, with the first batch of the funds likely coming next year. The grant represents 10 percent of the planned investments of US$4 billion in advanced semiconductor wafer manufacturing facilities in Texas and Missouri, GlobalWafers said. The commerce department is to disburse the funds based on the completion of project milestones over a multiyear timeframe, the company said. Along with the tax credit, which is equal to
RSS