Analyst Pin-board: STK – 1Q2020 Business Result Update
While the entire textile industry’s value chain is badly affected by the pandemic in 2020, STK is not an exception and the worst time, in our opinion, will be 2Q when many large markets enter the drastic phase of fighting the pandemic. Consumers' uncertainty about the economic prospects after the pandemic could lead to lower spending on some types of goods, including apparels. Low demand for apparels would indirectly affect yarn demand. However, we believe that STK can somewhat limit the impact of this trend thanks to (1) their production shift toward highly profitable recycled yarn (2) the relocation of textile production from China to Vietnam and other Asian countries and (3) the increasing trend of using domestically made yarn by Vietnamese garment companies to take advantage of EVFTA tariffs incentives.
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