COMPANY ANALYSIS REPORT
Song Hong Garment Joint Stock Company (MSH) is a leading manufacturer and exporter of textile and garment products in Vietnam. MSH focuses on products such as jackets, sportswear, and bedding sets. The company exports over 90% of its products to markets including the U.S., EU, Japan, and South Korea. With a modern factory system and a market expansion strategy, MSH maintains a strong position in the textile and garment industry.
INVESTMENT THESIS
- Revenue growth is driven by increasing demand in the U.S. and European markets. Revenue growth is supported by the continued recovery of textile and garment consumption in the U.S. and Europe. The previous interest rate cuts by the Fed and ECB are expected to have a clearer impact on the economy, especially in the second half of the year, thereby supporting credit growth and stimulating consumer spending. Additionally, retail clothing sales in these two markets have shown positive signs, creating opportunities for textile and garment companies.
- Increase in new orders due to tariff advantages. We expect Vietnam's textile and garment industry in 2025 to be less affected by new U.S. tariff policies. The additional 20% tax on Chinese goods may encourage the shift of textile and garment orders away from China, and Vietnam is expected to benefit from this trend.
- Expansion of production scale and capacity. MSH has completed and put into operation 50% of the capacity of the Xuan Truong II factory at the beginning of 2025, equivalent to 25 sewing lines, increasing the company's total production capacity by approximately 13%. The factory integrates modern technology and operates under green factory standards. As a result, MSH is well-positioned to meet high-quality orders and expand its customer base.
- 2025 business forecast Net revenue is estimated to reach VND 5,751.9 billion (+8.9% YoY), with FOB revenue increasing by 9% and CMT revenue rising by 8.6%. Pre-tax profit is expected to be VND 603 billion (+11.5% YoY), driven by MSH's ability to secure high-margin orders and strong growth in outsourcing activities. The company benefits from favorable price negotiation capabilities, while processing costs remain stable.
2024 BUSINESS UPDATE
- MSH Reports Net Revenue of VND 5,280.4 Billion in 2024, up 16.3% YoY. MSH recorded net revenue of VND 5,280.4 billion in 2024, marking a 16.3% YoY growth, driven by the recovery in apparel consumption in the U.S. and Europe. Additionally, the company benefited from the shift of orders away from Bangladesh. Revenue from the FOB and CMT segments increased by 16% and 17.8%, respectively, with FOB continuing to play a dominant role in the revenue structure.
- Pre-tax profit reached VND 439 billion, up 76.5% YoY. The net profit margin improved to 8.3%, compared to 5.4% in 2023, as MSH focused on high-value orders with better profit margins and successfully negotiated favorable pricing, while selling expenses increased at a moderate pace. Financial income grew by 10.1%, and a reduction in selling expenses also contributed positively to margin expansion.
RECOMMENDATION
OUTPERFORM recommendation with a 1-year target price of VND 69,000/share and an upside potential of 11.8%.
VALUATION
- Using the Free Cash Flow to Firm (FCFF) discounted cash flow valuation method, we set a one-year target price of VND 69,000.
- Risks: (1) The U.S. imposing higher-than-expected import tariffs on Vietnamese textile and garment products; (2) Slow recovery in consumer demand in the U.S. and Europe; (3) Intense competition from both domestic and international competitors.
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