M IdeaAsia – Apparel and Footwear Supply Chain | Asia Pacific2024 Outlook: On Front Foot for Multi-year UpcycleMorgan Stanley Taiwan Limited+Terence ChengEquity Analyst Terence.Cheng@morganstanley.com +886 2 2730-2873 Jenny TingResearch Associate Jenny.Ting@morganstanley.com +886 2 2730-2995 Morgan Stanley Asia Limited+Lillian LouEquity Analyst Lillian.Lou@morganstanley.com +852 2848-6502 Morgan Stanley appreciates your support in the 2024 Institutional Investor All-Asia Research Team Survey. Request your ballot here. China/Hong Kong ConsumerAsia PacificIndustry ViewIn-LineTaiwan Consumer and IndustrialsAsia PacificIndustry ViewIn-Line Exhibit 1 : What's Changed SummaryLast CloseCompanyTicker1/24/2024NewOldNewOldNewOld2023E2024EEclat1476.TW541.00OWOWTWD 680.00TWD 700.0026x26x-7%-6%Shenzhou2313.HK72.20OWOWHKD 100.00HKD 100.0023x23x-3%-11%Stella1836.HK10.4OWOWHKD 12.00HKD 10.008x8x8%8%Huali 300979.SZ54.35OWEWHKD 62.00HKD 55.0018.5x18.5x-10%0%Crystal2232.HK2.88OWUWHKD 3.30HKD 2.407.0x5.5x-1%-1%Fulgent Sun9802.TW124.50OWOWTWD 175.00TWD 180.0014.5x15.0x-1%4%Makalot1477.TW355EWOWTWD 375.00TWD 450.0021.0x23.0x-5%-11%Yue Yuen0551.HK8.11EWEWHKD 8.50HKD 10.007.5x7.5x-15%-14%Regina Miracle2199.HK2.11EWOWHKD 2.20HKD 4.706.5x11x-31%-37%Taiwan Paiho9938.TW54.3UWUWTWD 45.00TWD 40.0011x10x-31%-13%Pacific Textiles1382.HK1.23UWUWHKD 1.05HKD 1.455.5x6.0x-17%-31%Feng Tay9910.TW161.5UWUWTWD 135.00TWD 140.0018.5x18.0x-19%-17%EPS Change (%)RatingPT (NT$)Target P/E (CY2024) Source: Company data, Morgan Stanley Research, E=Morgan Stanley Research Estimates We expect the normalization of order intakes and summer Olympics to drive OEMs' top-line strength to some extent in 2024, boosting capacity utilization and supporting margins. Supply consolidation and supply chain rebalancing should further drive a multi-year upcycle for quality OEMs, in our view. 2024 set to be a top-line growth story for apparel/footwear OEMs: With major global brands and retailers working down their inventory in 2023, we expect Asian OEMs to see a customer order recovery. We think 1H24 will still be a process of normalization of order placement instead of active restocking, as the overall economic outlook is still unclear. However, if the global economy is resilient without major setbacks, we think OEMs' order books will see sustained growth into 2H24. While the Summer Olympics could drive related product orders, we think it will act as more of a sentiment driver. Overall we are positive on the Asian apparel and footwear OEMs' outlook in 2024 and onwards given these near-term factors and structural supply-side consolidation that has accelerated since the pandemic, driven by demand shock in 2Q-3Q20, Vietnam lockdown in 3Q-4Q21, and end-market inventory destocking in 4Q22-3Q23. Also, ongoing supply chain rebalancing needs from brands/retailers should continue to favor large OEMs with resources to diversify their production bases, garnering more orders in the long run. All in, we expect...
