- We upgrade our rating for STK from OUTPERFORM to BUY and raise our target price by 37% as we increase our 2024F and 2025F NPAT by 44% and 39%, respectively, which is partly offset by our 6% lower 2023F NPAT due to higher SG&A and interest expenses.

- We raise our sales volume forecasts beyond 2023 as we expect STK to benefit from customers relocating their yarn and fabric orders from China to Vietnam, which has been signaled to STK and domestic manufacturers by brand customers.

- STK expects its Q3 2023 business results to be similar to Q2 2023, followed by a significant recovery in Q4 2023 and 2024. While its brand customers forecast strong sales growth, the destocking of sportswear brands lagged the broader industry, prolonging STK’s recovery.

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