[ET Net News Agency, 24 January 2020] Nomura lowered its target price for Crystal
International Group (02232) to HK$3.3 from HK$3.8 and maintained its "neutral" rating.
The research house said Crystal had been anticipating an additional 15% tariff due to
US/China trade war (while arising from the US/China trade war and well managed its
relocation program to shut down some capacity in China, which was relocated to Vietnam in
1H 2019, resulting in a one-off US$14mn relocation expense booked in 1H.
Crystal has strategically cut orders for non-core sportswear customers in an effort to
focus on brand names that can place bulk purchase orders, such as Under Armour, North
Face, and Puma. The company has newly signed a partnership with Adidas and production kick
off in 2H 2019,
New capacity for sportswear will commence operation in FY2021. Nomura expects sales
growth for this category and margins to remain under pressure in FY2020, before an
acceleration in FY2021 as new customers start to contribute more significantly.
Nomura lifted its earnings forecast for FY2019 by 5% given the order and margin
improvement in 2H versus 1H and cut FY2020-21 earnings by 1-7% to reflect the slower
recovery of sales and margin. (KL)