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Analyst Pin-board Textile and garment industry – Conflicting results in third quarter performance

• Due to COVID-19’s disruptions in 3Q21, many garment companies located in HCMC area were very affected- such as TCM, GMC and GIL. On the other hand, some companies had their own tailwinds, helping earnings grow strongly YoY, such as STK, VGT, MSH and TNG.
• We recommend to ACCUMULATE STK with a target price of VND 65,000/share due to bright recycled yarn prospects and the incorporation of a new factory (Unitex) into our valuation. With regards to MSH, we see the potential to revise up the target price, but we still maintain our view that the strong earnings growth potential in 2022 has largely been priced in…

The recovery trend was interrupted in 3Q21

• In 3Q21, the textile and garment industry faced an extremely difficult time due to the COVID-19 outbreak in HCMC and the South. Companies located in these areas had to close or cut production, failing to fulfill orders, delivering goods late, or even having orders canceled by customers. In contrast to a 41% YoY surge and 5% increase compared to the 2019 level of textile and garment export value in 2Q21, Vietnam recorded a flat figure YoY and a 7.5% decline compared 2019 in 3Q21 (Figure 1).
• In line with the difficulties of the industry, most of the textile and garment companies flattened or decreased QoQ in 3Q. However, we notice a clear divergence in Q3 business results among companies in the industry. We found that garment companies located in HCMC area were most affected, namely TCM, GMC and GIL. On the other hand, some companies had their own tailwinds, helping earnings grow strongly YoY, such as STK, VGT, MSH and TNG. Particularly