- STK released Q3 2022 results that are weaker than we expected as revenue edged down 3% QoQ and NPAT-MI slumped 28% QoQ. 9M 2022 revenue and NPAT-MI achieved only 71% and 61% of our respective 2022F mostly due to weak sales and large FX losses. We see potential downside risk to our forecasts, pending a fuller review.

- The destocking of built-up inventory of customers across the value chain exacerbated the impact of weak textile demand and apparel sales. This bullwhip effect is especially prominent in the case of STK — an upstream material producer.

- Recycled yarn — especially high-end recycled yarn — outperformed as the whole category’s sales volume was flat QoQ and its price gap (yarn selling price – input PET chip price) expanded 8% QoQ to a new record high. Meanwhile, virgin yarn incurred a net loss due to a low-teen QoQ decline in both sales volume and price gap.