Investment Rating - The report assigns a rating of "Outperform" for Crystal International, indicating an expected total return over the next 12-18 months that exceeds the relevant market benchmark [20]. Core Insights - Crystal International reported solid revenue and profit growth, achieving revenue of USD 1.229 billion in 1H25, a year-on-year increase of 12.4%. The gross profit reached USD 243 million, up 19.7% YoY, with a gross margin of 19.8% [2][8]. - The company is experiencing strong order inflow and high production line utilization, primarily driven by deeper penetration into core brand customers, including a 20% YoY increase in orders from its largest customer, Uniqlo [3][9]. - Management anticipates a revenue growth of approximately 10% for the full year 2025, with profit growth expected to outpace revenue growth [5][12]. Revenue and Profit Performance - In 1H25, revenue by product category showed growth rates of +11.4% for casual wear, +12.4% for sports and outdoor wear, +10.3% for denim, +9.5% for lingerie, and +29.2% for sweaters, with sweaters showing the most significant growth [2][8]. - By region, revenue growth was +14.5% in Asia Pacific, +11.7% in North America, +9.7% in Europe, and +14.9% in other regions, contributing 39%, 38%, 21%, and 3% of total revenue, respectively [2][8]. Cash Flow and Dividends - Operating cash flow for 1H25 was USD 155 million, with a net cash position of USD 517 million at the end of the period, supporting high dividends and expansion [2][8]. - An interim dividend of HKD 0.163 per share was announced for 2025, higher than HKD 0.138 in 2024, maintaining a payout ratio of 60% [2][8]. Capacity and Production Strategy - The company is diversifying its capacity layout, with ongoing expansions in Vietnam, Cambodia, and Bangladesh, and is evaluating a new plant in Egypt to reduce transportation cycles and tariff risks [5][11]. - The implementation of a "satellite factory" model in Vietnam aims to ease labor competition and improve employee retention, with positive feedback received so far [5][11]. Long-term Growth Strategy - Crystal International's long-term strategy focuses on solid fundamentals, including product quality, delivery speed, and customer service, while enhancing competitiveness through multi-category synergy and vertical integration [5][12]. - The company aims to achieve around 60% of export fabric supply to be self-produced within five years, indicating a clear path for long-term growth [5][12].

Core Viewpoint - The company reported strong mid-year performance for 2025, with revenue and net profit growth aligning with expectations [1][2] Group 1: Financial Performance - In H1 2025, the company achieved revenue of $1.229 billion, a year-on-year increase of 12.4% [1] - The net profit for the same period was $98.32 million, reflecting a year-on-year growth of 16.8% [1] - The gross margin improved by 0.2 percentage points to 19.7% [2] Group 2: Product Performance - Revenue by product showed significant growth: - Casual wear: $340 million (+11.4%) - Sports and outdoor wear: $313 million (+12.4%) - Denim: $262 million (+10.3%) - Underwear: $210 million (+9.5%) - Sweaters: $105 million (+29.2%) [1] Group 3: Regional Performance - Revenue by region was as follows: - Asia-Pacific: $478 million (+14.5%) - North America: $463 million (+11.7%) - Europe: $253 million (+9.7%) - Other regions: $36 million (+14.9%) [1] Group 4: Cost Management - The company reduced its expense ratio by 0.5 percentage points to 10.8% [2] - Specific expense rates included: - Selling expenses: 1.3% (unchanged) - Administrative expenses: 7.6% (-0.3%) - R&D expenses: 1.3% (-0.1%) - Financial expenses: 0.5% (-0.03%) [2] Group 5: Dividend Policy - The board announced an interim dividend of 16.3 Hong Kong cents per share, with a payout ratio of 60% [2] Group 6: Investment Outlook - The company is positioned as a leading apparel manufacturer, with expectations for continued growth in market share among new clients in the sports sector [2] - Profit forecasts for 2025-2027 are projected at $1.68 billion, $1.95 billion, and $2.23 billion, representing year-on-year growth of 16%, 16%, and 14% respectively [2]

Investment Rating - The investment rating for the company is "Buy" (maintained) [3][8] Core Views - The company reported strong mid-year results that met expectations, with a revenue of USD 1.229 billion, representing a year-on-year increase of 12.4%, and a net profit of USD 98.32 million, up 16.8% year-on-year [5] - The company continues to maintain a high dividend payout, announcing an interim dividend of 16.3 Hong Kong cents per share, with a payout ratio of 60% [5] - The company is recognized as a leading apparel manufacturer, expanding its quality customer base, particularly in the sports sector, which is expected to enhance its market share [5] Financial Performance Summary - Revenue and Profit Forecasts: - Revenue for 2023 is projected at 15,651 million, with a year-on-year growth rate of -11% - Expected revenue growth rates for 2024 and 2025 are 13% [3] - Net profit for 2023 is forecasted at 1,158 million, with a year-on-year growth rate of -4% [3] - Earnings Per Share (EPS) is expected to increase from 0.41 in 2023 to 0.59 in 2025 [3] - The company’s gross margin improved by 0.2 percentage points to 19.7% in the first half of 2025 [5] - The company’s net asset return rate is projected to remain stable at around 14% from 2025 to 2027 [3] Revenue Breakdown - By product, revenue from casual wear, sports and outdoor wear, denim, intimate apparel, and sweaters was USD 340 million, USD 313 million, USD 262 million, USD 210 million, and USD 105 million respectively, with year-on-year growth rates of 11.4%, 12.4%, 10.3%, 9.5%, and 29.2% [5] - By region, revenue from the Asia-Pacific, North America, Europe, and other regions was USD 478 million, USD 463 million, USD 253 million, and USD 36 million respectively, with year-on-year growth rates of 14.5%, 11.7%, 9.7%, and 14.9% [5]

Investment Rating - The report initiates coverage on Crystal International, assigning a "Buy" rating with a target price of HKD 7.38, corresponding to a 12x PE for 2025E [1][7]. Core Views - Crystal International is a leading global garment manufacturer with over 30 years of deep collaboration with Uniqlo, operating more than 20 factories across Vietnam, China, Cambodia, Bangladesh, and Sri Lanka, ensuring ample overseas production capacity [1][22]. - The company has strategically entered the sportswear segment through the acquisition of Vista in 2016, enhancing its self-sufficiency in fabric production and expanding its client base to include major brands like Adidas, Nike, and Lululemon [2][17]. - The report anticipates a significant increase in the company's dividend payout ratio from 31.5% in 2021 to 70.1% by 2024, reflecting a commitment to enhancing shareholder returns [1][20]. Summary by Sections Company Overview - Crystal International, established in 1970, has diversified its product offerings to include sweaters, casual wear, denim, underwear, and sportswear, delivering over 470 million garments annually [17][22]. - The company has a robust global presence with production facilities in various countries, which mitigates risks associated with trade uncertainties [21][22]. Market Position and Growth Potential - The global sportswear market is projected to grow at a CAGR of 6.3% from 2024 to 2028, reaching USD 313.1 billion, indicating a favorable environment for the company's growth [2][18]. - Crystal International's unique "Co-creation" model allows for deep involvement in clients' R&D and design processes, strengthening its ODM capabilities and customer loyalty [2][18]. Financial Performance and Projections - The report forecasts net profits for Crystal International to grow by 15.7%, 15.1%, and 11.6% from 2025 to 2027, reaching USD 2.3 billion, USD 2.7 billion, and USD 3.0 billion respectively [5][17]. - The company's revenue from sportswear is expected to increase from 9.6% to 22.5% of total revenue between 2018 and 2024, with a corresponding rise in gross margin from 18.6% to 19.7% [3][19]. Competitive Advantages - Crystal International's long-standing relationship with its largest client, maintaining a stable revenue contribution of around 30%, reduces dependency risks [4][21]. - The company benefits from a significant overseas workforce (84%) and a diversified production base, which enhances its competitive edge in the global market [4][21].