U/G Near-term outlook reassuring, while US macro likely bottoming out
​Upgrade from Hold to BUY: Previously we were cautious that Eclat would likely miss its guidance and market expectations again, even after downward revisions post 3Q16 earnings, given weak Oct sales declined 18% YoY, vs. guidance for flat 4Q16F revenue YoY. However, our recent check with mgmt makes us more confident on the 4Q16F revenue and earnings outlook, and we believe a likely ceasing of consecutive downward revisions is positive for the share price. In addition, we believe US macro is likely bottoming out given accelerating apparel sales growth and healthier inventory levels YoY. We raise 2017/18F EPS by 2%/9%, and accordingly lift our TP to NT$385, based on 21x 2017F P/E (from 20x) and our DCF valuation methods. The market reaction to jacquard fabric & body mapping and Eclat’s production schedule is the key to watch.
Eclat Textile Company Limited. ECLAT TEXTILE CO., LTD. is a Taiwan-based company principally engaged in the garments and fabrics businesses. The Company's primary products include active wear, performance wear, ready to wear, seamless wear, flexible knit fabrics, organic cotton fabrics, lyocell fiber fabrics, rayon fiber fabrics, polymer fiber fabrics, anti-bacterial fabrics and others. Its fabrics are mainly used in the production of sportswear, casual garments, underwear and swimsuits. The Company mainly operates through two business segments. The Knitted Fabrics Business segment is mainly engaged in the production and sales of knitted fabrics. The Ready-made Garments Business segment is mainly engaged in the manufacturing, processing and trading of garments. The Company mainly operates its business in Taiwan, the Americas and other Asian markets.
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