Garment and fabric supplier Eclat Textile Co (儒鴻) on Monday reported better-than-expected revenue of NT$3.7 billion (US$129.9 million) for last month, up 48.4 percent month-on-month and 35.6 percent year-on-year, as the work-from-home trend and people exercising more amid the COVID-19 pandemic spurred sales of casual clothing and leisure wear.
Driven by restocking demand, revenue increased for a fourth straight month last month and hit a new high, analysts said.
That brought Eclat’s quarterly revenue to NT$9.33 billion, up 26.5 percent quarterly and 20.5 percent annually, beating Jih Sun Securities Investment Consulting Co’s (日盛投顧) estimate of NT$8.19 billion.
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Although the pandemic initially led to a 13.07 percent annual drop in revenue in the first half of last year, recovering demand, rush orders and new clients lifted sales in the second half, allowing full-year revenue to edge up 0.18 percent to a record NT$28.18 billion.
Analysts said that given container shortages, Eclat’s booking of NT$300 million in sales was delayed from November to last month, while recognition of another NT$400 million in sales would also be delayed from last month to this month.
Given the positive outlook for the company’s orders in the first half of this year, coupled with two major clients revising up their sales estimates for this quarter and improved US apparel retail sales in the past few months, Jih Sun on Monday said it was maintaining its “buy” rating on Eclat shares, with a target price of NT$480.
Yuanta Securities Investment Consulting Co (元大投顧) also retained its “buy” rating on Eclat shares, but raised its target price to NT$535 from NT$480.
“We expect double-digit sales growth for Eclat in 2021 and 2022, with growth returning to the upcycle levels seen in 2013-2015,” Yuanta said in a note on Monday.
“This is mainly due to brand and channel clients accelerating supplier concentration amid the [COVID-19] pandemic, with Eclat seeing continued order growth from Nike Inc and Lululemon Athletica Inc, as well as transferred orders from Target Corp, given its healthy financial structure and large, flexible capacity,” the note said.
Sales to Nike and Lululemon are expected to account for 15 to 16 percent and 8 to 10 percent of its overall sales this year, while Target and Under Armour Inc would make up more than 5 percent each, Yuanta said, adding that the top four clients’ contribution would rise to 40 percent this year from 30 percent last year.
As 90 to 100 percent of Eclat’s sales and 70 to 80 percent of its operating costs are denominated in US dollars, the appreciation of the New Taiwan dollar would affect Eclat’s gross margin, but this is expected to be offset by the company’s improved product mix, expanding economies of scale and average selling price adjustments, Yuanta said.
Eclat shares yesterday rose 2.29 percent to close at NT$425 in Taipei trading.
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