Significant YOY profit growth strengthens Roo Hsing’s outlook

Significant YOY profit growth strengthens Roo Hsing’s outlook

Clothing manufacturer Roo Hsing Co., Ltd. (4414) has continued adjusting its structure in recent years and its operations have gradually improved. Net income nearly doubled compared to the same period last year. The market is optimistic regarding Roo Hsing’s profit growth this year and profits may even have an opportunity to set a 10 year high. Institutional investors estimate that, since Roo Hsing shares are fundamentally sound and the decline of its monthly average has abated, the stock is expected to move on a new high of NT$21.75 on increased volume.

Roo Hsing has posted losses every year since 2006 and faced its greatest operational crisis during the financial crisis of 2008. In 2009, Wei Hao Investment representative Chen Shih-hsiu decided to take a stake in Roo Hsing to become its majority shareholder due to optimism related to its large U.S. clients such as Levi’s, advantages in order acquisition, low fungibility, and good management structure. After 2010, Roo Hsing operations gradually improved and the company returned to profitability. The company posting net income per share of NT$1.32 last year and its board of directors resolved to issue a cash dividend of NT$0.94 per share.

In addition to its largest client Levi’s, Roo Hsing clients include GAP and TOMMY HILFIGER. Currently, its manufacturing facilities are located primarily in Cambodia and Nicaragua.

Due to steady growth in clothing OEM orders, Roo Hsing operations have gradually improved, posting net income of NT$89.85 million last year for an annual growth rate of 68% and an EPS of NT$1.32. This year, the company will benefit from growth in Armani orders of approximately 100%. In response to order growth, Roo Hsing raised NT$450 million in cash to invest in factories in China and Vietnam.

Roo Hsing posted April revenue of NT$198 million for a monthly growth rate of 26.2% and an annual growth rate of -12.12%. Cumulative revenue for January to April was NT$835 million for an annual growth rate of -1.98%.

Roo Hsing’s current order solicitation strategy is moving towards clients offering functional high unit price orders. The company’s Q1 gross profit was nearly 20% or a year-on-year increase of nearly six percentage points. With the recovery of the European and U.S. markets, this year’s order growth rate has beat expectations. Currently, order visibility has become more favorable and yearly profit growth is expected, extending 2013 growth momentum.

Institutional investors stated, Roo Hsing posted Q1 EPS of NT$0.63, clearly surpassing the same period last year. Share prices were recently pressured by capitalization shares, demonstrating a quick pullback after a spike on high volume. If prices consolidate at their quarterly average the stock is expected to challenge its previous high on increased volume.

Updated : 2021-04-13 16:32 GMT+08:00