Investment Rating - The report has downgraded several companies' ratings, with Makalot Industrial moving from Equal-weight to Underweight, and Lai Yih Footwear Co Ltd from Equal-weight to Underweight. Conversely, Stella International Holdings Ltd and Crystal International Group Ltd have been downgraded from Overweight to Equal-weight [1][28]. Core Insights - The report indicates that US tariffs on apparel and footwear are not finalized, creating uncertainties in the supply chain. However, the risk-reward profile for apparel and footwear OEMs has become more attractive following recent stock corrections, alongside persistent structural positives [1][10]. - A scenario analysis suggests that the apparel and footwear OEMs could face an 8-11% downside risk to 2025 earnings and a 4-5% downside for 2026 earnings under the base case scenario, which factors in a 20% tariff [9][15]. - The long-term competitive edge of OEMs remains intact due to supply-side consolidation, driven by brands' demand for multi-location production and strong customer relationships [11][24]. Summary by Company - **Eclat Textile (1476.TW)**: Maintains Overweight rating with a price target reduced from NT$640 to NT$550. The company has strong exposure to niche and premium products, which are expected to sustain demand [1][33]. - **Makalot Industrial (1477.TW)**: Downgraded to Underweight with a price target reduced from NT$310 to NT$250. The company faces challenges amid tariff uncertainties [1][28]. - **Feng Tay (9910.TW)**: Retains Overweight rating with a price target reduced from NT$168 to NT$145. The company is seen as a proxy for Nike and may benefit from potential brand momentum [1][33]. - **Stella International Holdings Ltd (1836.HK)**: Downgraded to Equal-weight with a price target reduced from HK$20.50 to HK$15.60. Despite structural advantages, the stock has rallied significantly, prompting the downgrade [1][28]. - **Crystal International Group Ltd. (2232.HK)**: Downgraded to Equal-weight with a price target reduced from HK$6.25 to HK$5.30. The company is viewed as fairly valued after a significant price increase [1][28]. - **Lai Yih Footwear Co Ltd (6890.TW)**: Downgraded to Underweight with a price target reduced from NT$320 to NT$270. The company faces competitive pressures that may impact margins [1][28]. Market Dynamics - The report highlights that the probability of moving supply chains to the US is low due to higher construction costs and a lack of skilled workforce. This suggests that OEMs with diversified production exposure will likely gain market share [12][24]. - The analysis indicates that apparel OEMs are preferred over footwear OEMs due to lower wage costs as a percentage of COGS, providing more flexibility amid order volatility [25][27].