Title Taiwan Paiho (9938 TT) Buy
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Title:Taiwan Paiho (9938 TT) Buy
Download File:9938 TT Taiwan Paiho report 190215--sinopac.pdf 
Summary:Buy, TP of NT$76 (15x 2019F operating EPS of NT$5.07): 1) Nike is inspecting Paiho¡¯s plants for one-piece uppers and subsidiary Paiho Shih¡¯s warp knitted jacquard mesh products. Certification is likely in 1Q19 and 3Q19 respectively (company estimate), which will give a boost to Paiho group¡¯s long-term competitiveness; 2) Paiho Shih¡¯s warp knitted jacquard mesh products developed in 2018 will see ramping shipment in 2019 sequentially (increased allocation within Adidas and expected Nike orders), which will ease its drag on overall earnings; 3) Operating margin will improve moderately thanks to stable growth of traditional products, a positive for earnings growth; 4) Valuation: the stock is trading at 13-14x 2019F operating EPS of NT$5.07. We think the company¡¯s growth potential on the back of possible certification gains will boost its valuation back to 2015-2017 levels. Buy after stock pulls back on 1Q seasonality.
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