STK – 2023 awaits a bounce back
- As an upstream producer, STK was hurt earlier than textile/apparel producers. Cumulative 9M22 sales came to VND 1,685 bn (+9%YoY) and NPAT-MI to VND 196 bn (-4% YoY), fulfilling 65% of the company’s sales and NPAT-MI targets. GPM shrank 109 bps YoY as the overall price gap (ASP less average chip cost) dropped about 5.5% YoY, mainly due to a 28% decline of virgin yarn price gap.
- We expect 2023 earnings to rebound although STK might experience negative earnings growth in 1H23 due to subbed demand. We estimate FY23 EPS growth of 13%, driven by (1) improved order volume, (2) average chip costs for both virgin and recycled yarn returns to around 4Q21 levels after peaking in 2Q22, and (3) FX losses ease based on our estimate 2% VND/USD depreciation in 2023.
- We maintain a BUY rating while lowering the one-year target price to VND 32.500/share (from VND 38.200/share). The lower TP is primarily driven by due to a reduction in the Unitex plant's expected capacity. With an expected cash dividend of VND 500/share in the next 12 months, it implies a total return of 23%, based on the closing price of Dec 29th
Century Synthetic Fiber Corporation (STK) is a Vietnam-based company operating in the textile industry. The Company is mainly engaged in the manufacture and commerce of synthetic yarns, with major products as draw textured yarns (DTY) and fully drawn yarns (FDY) made from polyester chips. The Company does not only distribute its products to local textile firms, but also supplied them to overseas clothing companies, such as Nike, Adidas, Uniqlo, Columbus and Guess, among others.
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