Textile stocks face uncertain future as recovery hinges on export market and inventory management

Nov 7th at 13:52
07-11-2023 13:52:43+07:00

Textile stocks face uncertain future as recovery hinges on export market and inventory management

The potential price increase of textile stocks in the latter part of 2023 is heavily reliant on the recovery pace of the export market and the ability of brands to manage inventory levels. However, the third-quarter results of textile and garment enterprises displayed a decline.

Workers at a factory of Garment 10 Corporation SJC (M10). In August, Việt Nam's textile export turnover reached US$4.06 billion, surpassing the 2022 average of $3.72 billion. — Photo courtesy of M10

After a period of optimistic growth, the textile and garment export sector experienced a prolonged slowdown starting from late 2022 to early 2023. This was a consequence of various factors, including the Russia-Ukraine conflict, geopolitical tensions, inflation and reduced consumption.

In August, textile export turnover reached US$4.06 billion, surpassing the 2022 average of $3.72 billion. Orders gradually began to return in the final months of the year, indicating positive signs.

"For the first time, we received production orders from customer brands in Thailand and the Philippines. Although the number of orders cannot be compared to the size of the US and European markets, it demonstrates the company's efforts in diversifying global markets," said Thân Đức Việt, general director of Garment 10 Corporation SJC (M10).

Domestic economic factors also support the textile exports. Decreasing lending interest rates provide businesses with opportunities to utilise cheaper credit sources compared to the beginning of the year, meeting capital requirements and increasing production investment.

Analysts suggest that Việt Nam's exports have reached their lowest point, and there are indications of recovery in the fourth quarter, aided by the depletion of US retailers' inventories. The recovery is also attributed to the growing trend of multinational companies shifting their production from China to Việt Nam.

"Businesses are expected to achieve positive profit growth as early as the fourth quarter of 2023," forecasts SSI Research.

Not only does the textile and garment sector play a crucial role in export activities, but it also comprises a significant number of listed companies on the stock exchange.

From late August to mid-October, while the market faced mounting pressure, cash flow continued to gravitate to textile and garment stocks.

For instance, on September 21, TNG shares of TNG Investment and Trading JSC reached VNĐ22,300 per share, the highest level in 12 months. Subsequently, the stock experienced a downward adjustment, closing at VNĐ18,400 per share on November 3, a nearly 17.5 per cent decline from the recent peak.

HTG stocks of Hòa Thọ Textile - Garment JSC witnessed a price increase from April until October 16, reaching VNĐ33,000 per share before undergoing a downward adjustment. At this price, HTG shares had increased by approximately 50 per cent since the beginning of the year.

Similarly, MSH of Sông Hồng Garment JSC reached VNĐ45,600 per share on October 13, sustaining the increase until mid-October. Compared to the start of the year, the market price of MSH had risen by roughly 45 per cent.

Regarding valuation, Việt Dragon Securities Co (VDSC) stated that shares of textile and garment companies are currently trading at a trailing P/E level significantly higher than the historical average. Hence, expectations of recovery prospects have already been partially incorporated into stock prices.

VDSC emphasised that the potential price increase of textile stocks in the second half of 2023 depends largely on the export market's recovery speed and brands' ability to manage inventory levels.

However, the third-quarter results of textile and garment enterprises demonstrated a decline, contrary to market expectations. In the first nine months of 2023, most textile and garment companies reported negative profit growth or even substantial losses compared to the same period in the previous year.

Most recently, Việt Nam Textile and Garment Group (VGT) reported a cumulative net revenue of VNĐ12.18 trillion and pre-tax profit of VNĐ288 billion for the first nine months of the year, representing a decline of 14 per cent and 76 per cent, respectively.

Similarly, Thành Công Textile and Garment Investment Trading Joint Stock Company (TCM) reported a 50 per cent decrease in profit during the first nine months of 2023 compared to the same period in 2022, amounting to VNĐ111 billion.

Century Fiber Joint Stock Company (STK), another textile enterprise, recorded a net revenue of VNĐ1.07 trillion and an after-tax profit of nearly VNĐ56 billion for the nine-month period, experiencing a downturn of 36 per cent and 72 per cent, respectively, compared to the same period in 2022. 

Bizhub





RELATED STOCK CODE (9)

NEWS SAME CATEGORY

VN-Index rises for 4th day in a row

The stock market opened the week on a positive note despite a slight contraction in liquidity, while foreign capital continued to flow into the two main bourses.

Foreign Investors sell off in October, HoSE reports net sales of over VNĐ1.59 trillion

According to the HCM City Stock Exchange (HoSE), foreign investors were net sellers in October, with a total value of more than VNĐ1.59 trillion.

Market sentiment to improve further on supportive news

The stock market recovered strongly in the last three sessions, raising expectations that the VN-Index is in a stage of breaking out from the bottom. Analysts...

Market extends gains on improved liquidity

Benchmark indices extended gains to the second day on the improvement of liquidity and bottom-fishing demand.

Shares close higher on bargain-purchases

The stock market finished higher Wednesday, boosted by bargain-hunting force after a two-day correction.

​5 Vietnamese business tycoons remain on Forbes’ billionaire list

Stock market volatility caused the net worth of multiple Vietnamese billionaires to plunge, with only five listed among the world’s top wealthiest people in Forbes’...

VN-Index loses nearly 11 per cent in October

The market settled lower on Tuesday and logged a monthly fall in October as persistent selling force continued to weigh on investor sentiment.

Amid margin boom, securities companies report impressive Q3 profits

Falling interest rates led to an increased margin loan balance in Q3 2023 as domestic investors found stocks more appealing than bank savings.

Market tumbles, liquidity remains low

The Vietnamese stock market retreated on Monday as selling pressure weighed on sentiment, whilst foreign investors continued to net sell on the southern bourse.

VN-Index to trade in range of 1,200-1,250 points at year end

The Vietnamese stock market has witnessed choppy weeks since the beginning of the fourth quarter. Business results of the third and fourth quarters, as well as...

TRENDING


MOST READ


Back To Top