Recently, two enterprises from Hong Kong (China) and mainland China were granted investment registration certificates for textile and dyeing projects by the Nam Dinh Industrial Park Management Board.
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| Textiles and garments are the main export item in the first 6 months of this year. |
In a recent report, VNDirect Securities assessed that Song Hong Garment Joint Stock Company (stock code: MSH) - the second largest listed enterprise in terms of capitalization in the textile and garment industry, has many advantages to become the leading name in the industry.
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LOCATED AT THE "CRADLE" OF VIETNAM'S TEXTILE AND GARMENT INDUSTRY
According to VNDirect, Song Hong Garment's production areas are all located in Nam Dinh - the cradle of Vietnam's textile and garment industry. The supporting industries (CNHT) for textile and garment production here are very developed, including the production of raw materials (cotton, yarn, weaving, dyeing), auxiliary materials (needle, thread, buttons, zippers, lace, ...); accessories (keys, pins, beads, sequins, ...) and the production of machinery and equipment (including embroidery machines, overlock machines, punching machines, button machines, ...).
Nam Dinh aims to become a textile and garment center in the North. Currently, the province is attracting investors to the textile and garment industry, especially textile and garment supporting industry projects such as fabric production. Recently, two enterprises from Hong Kong (China) and mainland China have been granted investment registration certificates for textile and dyeing projects by the Nam Dinh Industrial Park Management Board.
In addition, a number of textile and dyeing projects of Taiwanese (Chinese) and Singaporean investors are expected to go into production in 2024 at Aurora Industrial Park (Nghia Hung, Nam Dinh).
This development is in line with the Government ’s orientation to improve the self-sufficiency of the Vietnamese textile and garment industry. According to the “Strategy for the Development of the Vietnamese Textile and Garment and Footwear Industry to 2030 and Vision to 2035” approved by the Government in December 2022, the localization rate of the textile and garment industry will reach 51% - 55% in the 2021-2025 period. This figure will increase to 56% - 60% in the 2026-2030 period, compared to the current 47-50%.
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VNDirect expects that promoting investment in fabric production in Nam Dinh will solve "bottlenecks" in fabric supply.
In addition, the formation of large textile industrial parks will promote investment in comprehensive and centralized wastewater treatment systems with advanced and environmentally friendly technology.
This will bring advantages to textile and garment enterprises in Nam Dinh, including Song Hong Garment.
IMPROVING FOB PRODUCTION CAPACITY TO MEET NEW ORDERS
Song Hong Garment is striving to build a factory that meets the standards and requirements of an environmentally friendly factory. The new Xuan Truong factory has invested the most in technology, energy saving and emission reduction, with the goal of becoming a high-tech green factory.
Solutions include the use of natural light, LED lights and planting trees around production areas. Furthermore, Song Hong Garment is switching from coal-fired boilers to electric boilers at Song Hong 7 and Song Hong 9 plants, and will continue to make improvements at other production areas.
VNDirect believes that Song Hong Garment will become a pioneer in sustainable production investment thanks to its strong financial foundation and leading ambition. The securities company also expects that Song Hong Garment will receive more FOB orders from current customers.
Song Hong Garment's partners project revenue growth in 2024-2025. G-III and Columbia Sportswear expect revenue to improve 3-5% year-on-year in 2024-2025 after declining in 2023.
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In addition, VNDirect believes that MSH is likely to benefit from current customers' efforts to reduce their supply dependence on China. G-III, one of Song Hong Garment's major customers, said that they currently prioritize Vietnamese partners over Chinese ones.
In 2023, products purchased from Vietnam accounted for 31.4% of G-III's total inventory, up from 24.6% in 2020, while products purchased from China accounted for 37.6% of G-III's total inventory in 2023, down from 49.5% in 2020.
XUAN TRUONG FACTORY - NEW TRUMP CARD
According to information from VNDirect, Xuan Truong II factory started construction in the fourth quarter of 2023 and is expected to be operational in late 2024 or early 2025. The factory has a total investment of VND 700 billion, an area of 9.6 hectares, including 3 factories, 1 warehouse and 1 cutting factory.
The entire factory has 50 sewing lines, with an expected design capacity of 30 million products/year. The Board of Directors expects the factory to operate at 50% capacity by 2025, contributing VND700 billion to total revenue, and will operate at 100% capacity from 2027, contributing VND1,500 billion, equivalent to 25% of current revenue.
When the new factory operates at full capacity, Song Hong Garment's production scale will reach 255 sewing lines, about 15,000 workers, a 32% increase in design capacity compared to the present.
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However, by the end of the second quarter of 2024, VNDirect estimated that Song Hong Garment had only disbursed a total of VND50 billion out of the total investment of VND700 billion of the factory. This securities company believes that the implementation progress will be slower than the company's plan and is expected to be operational in the third quarter of 2025.
VNDirect estimates that the new factory will contribute about VND250 billion, equivalent to 5% of total revenue in 2025. The securities company expects the Xuan Truong factory to operate at 100% capacity in 2028, generating revenue of VND1,500 billion, equivalent to 19% of total revenue in 2028.
ORDER PRICES MAY INCREASE IN 2024-2025 AS INFLATION COOLS DOWN, IMPROVING PROFIT MARGINS
VNDirect expects garment export prices to the US to improve slightly by 2% yoy in 2024 and improve more strongly in 2025 as inflation cools. MSH's management also has a similar view, expecting export order prices to increase slightly in 2024 and recover in 2025.
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In addition, VNDirect also believes that stable raw material costs will support gross profit margins. According to the United States Department of Agriculture (USDA), cotton prices will remain stable at $2,200-$2,300/ton in 2024 as global cotton production and consumption are expected to increase by 3%/3% yoy, respectively, in the 2024-25 crop season.
VNDirect forecasts that the price of imported cotton to Vietnam will stabilize at around $2,250/ton in 2024-25. This securities company expects Song Hong Garment's gross profit margin to improve by 1.1/1.6 percentage points compared to 2024-2025.
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According to cafef.vn
Source: https://baonamdinh.vn/tieu-diem/202409/nam-dinh-ram-ro-hut-von-nuoc-ngoai-de-tro-thanh-trung-tam-det-may-cua-mien-bac-cong-ty-niem-yet-lon-thu-2-nganh-det-may-huong-loi-b5d0b87/
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