Eclat Textile Co (儒鴻) has found new outsourcing factories and is expected to ramp up its own capacity by 15 percent next year to address a lack of capacity and labor in Vietnam this year, analysts said on Wednesday.
The garment and fabric supplier is likely to face a capacity shortfall of 1.8 million to 2.2 million pieces per month next year against rising orders from its major brand clients.
As a result, the company plans to raise its monthly garment output to more than 10 million pieces next year, from an estimated 8.5 million to 8.8 million pieces this year, said the analysts who attended the company’s earnings conference on Tuesday.
Eclat plans to lift its capacity utilization rate from 80 percent to 95 percent at factories in southern Vietnam, which should generate an additional 800,000 pieces per month, they said on Wednesday.
Eclat told analysts that it has secured outsourcing factories in southern Vietnam to add 24 production lines, which should boost monthly garment capacity by 400,000 to 450,000 pieces for this quarter and next quarter, while it is still searching for other outsourcing factories in northern Vietnam to add 10 to 20 new production lines per month, they said.
“The company has seen modest sales growth this year to date due to its lack of capacity and labor in Vietnam, but this is likely to be resolved in 2020,” Yuanta Securities Investment Consulting Co (元大投顧) analyst Peggy Shih (施姵帆) said.
Eclat’s cumulative revenue for the first 10 months of this year increased 1.35 percent from a year earlier to NT$23.03 billion (NT$754.1 million), the company said on Nov. 7.
Net income for the first three quarters was up 0.8 percent year-on-year to NT$3.16 billion, or earnings per share of NT$11.54, Eclat said in a financial statement issued on Monday last week.
The company’s sales and earnings for this quarter are expected to benefit from peak seasonality and stocking by a key retailer, SinoPac Securities Investment Service Corp (永豐投顧) said, without specifying the retailer.
Eclat is a leading integrated apparel manufacturer with operations in Taiwan, Vietnam and Cambodia. The company counts Nike Inc, Adidas AG, Under Armour Inc and Lululemon Athletica Inc among its major clients, and it would continue to benefit from clients’ supply chain consolidations, analysts said.
“The top five brand clients account for about 33-36 percent of Eclat’s total revenue and their contribution is expected to rise to 50 percent next year. There is no risk of disconnection in supply,” Jih Sun Securities Investment Consulting Co (日盛投顧) analyst Channie Wang (王章妮) said.
Eclat shares rose 3.06 percent last week to close at NT$404.5 on Friday in Taipei trading. They have gained 16.24 percent this year.
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