STK - Bright prospects for recycled yarn; bold expansion plan
Covid-19 has been accelerating changes in consumer awareness toward a sustainable lifestyle, which has been seen clearly in STK’s performance in 4Q2020. Garment orders are being shifted from China to Vietnam and garment companies are increasingly using domestically produced yarn to take advantage of tariff incentives. These factors will give ample growth opportunities for STK in the coming years.
Given the changes in our expectations on STK prospects in 2021 and next years based on the better than expected performance in 4Q2020, we raise our target price for STK from VND 22,400 VND/share to 33,200 VND/share to reflect such bright outlook. Combined with an expected cash dividend of VND 500/share in the next 12 months, the total return is 9% based on the closing price as of March 11th, 2021. We recommend to ACCUMULATE STK.
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