2020 05 01 2331 GoldmanSachs

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Asia Pacific Textile, Apparel & Footwear
Prefer pure China play amid global demand uncertainty:

d/g Makalot to Sell, switch Li Ning to CL vs Shenzhou
We believe the recovery path for OEMs will lag behind other China Consumer Michelle Cheng
+852-2978-6631 |
names. We continue to like sportswear as a consumer category where we see a michelle.cheng@gs.com
Goldman Sachs (Asia) L.L.C.
path of gradual recovery in the near term as well as long-term structural growth
Samuel Wang
potential. As a result, we switch our Conviction List pick to Li Ning from Shenzhou. +852-2978-1466 | samuel.wang@gs.com
We like Li Ning as a pure China player with solid brand momentum, cleaner
Cathy Chen
inventory, on-track margin expansion, and 30% upside to our unchanged TP. +852-2978-6621 | kaiqi.chen@gs.com
We fine-tune our earnings estimates for Anta/Li Ning post 1Q20 trading updates
(Anta, Li Ning). We continue to expect a gradual improvement in retail sales in 2Q20
with a recovery to growth from 3Q20 on the back of companies’ active inventory
management, continuous new product roll-outs, and structural growth. However, we
cut our earnings estimates (by 1-20% for 2020E-22E) for Shenzhou, Eclat, and
Makalot to reflect weaker global demand. We also adjust our P/E-based 12m TPs
accordingly (see Exhibit 1). While we originally expected the 1Q20 impact would be
smaller as orders are usually placed a quarter ahead, the restrictive lockdown
measures in many cities in the US/EU from March have likely led to shipment delays
or even some cancellations, resulting in weaker-than-expected sales. With the
challenging demand shock in the near term, all brands have highlighted aggressive
inventory and order control, especially into 2H20. Accordingly, we believe the
recovery path for OEMs will lag behind other China consumer names.
2aeb9e8b174644998c7303f5a989d953
Within our OEM sub-sector, we remove Shenzhou from our Conviction List but
retain our Buy rating as we remain confident in its ability to gain market share,
maintain Eclat as Neutral, and downgrade Makalot to Sell (from Neutral) as it
appears most vulnerable to US retail/fashion demand uncertainties. Within our
sportswear sub-sector, we add Li Ning to our Conviction List due to its higher sales
exposure in China, solid brand momentum, cleaner inventory and on-track margin
expansion, and we maintain Anta as Buy.
Goldman Sachs does and seeks to do business with companies covered in its research reports. As a result,
investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this
report. Investors should consider this report as only a single factor in making their investment decision. For Reg AC
certification and other important disclosures, see the Disclosure Appendix, or go to
www.gs.com/research/hedge.html. Analysts employed by non-US affiliates are not registered/qualified as research
analysts with FINRA in the U.S.
For the exclusive use of Jennifer Wu (jennifer.wu@carlyle.com) at The Carlyle Group Inc.
Downloaded from Capital IQ by Jennifer Wu (jennifer.wu@carlyle.com) at The Carlyle Group Inc. on Sunday May 31 2020 08:35:36 AM, Sessionid:en4ydjxuix4uwacliz0j44bz
Goldman Sachs Asia Pacific Textile, Apparel & Footwear
Table of Contents
Switching Li Ning as our top idea and adding to CL; Removing Shenzhou from CL but remain Buy 5
Downgrade Makalot to Sell from Neutral 10
Maintain Anta at Buy, Eclat at Neutral 13
Disclosure Appendix 16
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1 May 2020 2
Exhibit 1: Summary of TPs, ratings and earnings changes

Potential
Old New Marcap Price Pricing Old New TP upside/ PE PB
Company Ticker Rating Rating (US$mn) 29-Apr-2020 currency TP TP Chg downside 2020E 2021E 2020E 2021E
Li Ning 2331.HK Buy Buy* 7,743 24.45 HKD 31.8 31.8 0% 30% 38 25 6.8 5.5
Anta 2020.HK Buy Buy 22,673 65.45 HKD 76.0 78.0 3% 19% 30 20 6.9 5.9
Shenzhou 2313.HK Buy* Buy 17,523 90.35 HKD 100.0 100.0 0% 11% 29 22 4.6 4.1
Eclat 1476.TW Neutral Neutral 2,768 300.00 TWD 295.0 260.0 -12% -13% 21 20 4.3 4.0
Makalot 1477.TW Neutral Sell 943 127.50 TWD 108.0 99.0 -8% -22% 20 18 3.1 2.9
Revenue NI
(reported currency) Revenue changes Revenue growth yoy (reported currency) NI changes NI growth yoy
Company 2020E 2021E 2020E 2021E 2022E 2020E 2021E 2020E 2021E 2020E 2021E 2022E 2020E 2021E
Li Ning 14,658 18,828 -1% -1% 0% 6% 28% 1,466 2,182 2% 0% 0% -2% 49%
Anta 36,526 45,556 6% 3% 3% 8% 25% 5,466 8,039 4% 3% 3% 2% 47%
Shenzhou 20,581 25,685 -2% -1% -1% -9% 25% 4,275 5,748 -3% -1% -1% -16% 34%
Eclat 26,689 28,412 -9% -14% -14% -5% 6% 3,851 4,083 -10% -20% -19% -10% 6%
Makalot 24,348 25,078 -1% -6% -5% -10% 3% 1,375 1,536 -1% -9% -7% -28% 12%
*Denotes on our regional Conviction List
Source: Goldman Sachs Global Investment Research, Datastream
China sportswear: Expecting a U-shaped recovery

We’ve seen sequential improvement in March/April vs February in various sectors in
China (for more details see our measuring the recovery path series of products). We
expect Li Ning and Anta to see continuous improvement into 2Q20 and estimate
-3%/-8%/+7% yoy retail sales growth for Li Ning/Anta brand/Fila brand vs
15-20%/20-25%/MSD yoy decline in 1Q20. For Li Ning, we think the well-controlled
inventory level before the Covid-19 outbreak, MSRP upward adjustment, and flexible
cost structure should put it in a better position for continuous margin expansion even in
such a challenging environment. We forecast 6% revenue growth, 21% OP growth, and
16% NI growth (recurring) yoy in 2020.
For Anta, we are encouraged to see the solid momentum for Fila in 1Q20, though we
believe the aggressive discount for inventory clearance will impact its margins.
However, the uncertainty is still coming from Amer due to the uncertain global demand
recovery path vs. the China market. For the full year we expect 8% yoy revenue growth
and 9% yoy operating profit decline at the group level. In addition, we expect Amer to
2aeb9e8b174644998c7303f5a989d953
contribute a loss of RMB297mn, leading to NI growth of 2% yoy in 2020E.
Exhibit 2: We expect gradual recovery for domestic brands sales in Exhibit 3: ...similar for international brands recovery in China/Asia
China ... Reported revenue forecast
Retail sales forecast
Retail sales growth yoy

Reported revenue growth yoy
80%
40%
60% 30%
20%
40%
10%
20% 0%
-10% 1Q19 2Q19 3Q19 4Q19 1Q20E 2Q20E 3Q20E 4Q20E
0% -20%
1Q19 2Q19 3Q19 4Q19 1Q20 2Q20E 3Q20E 4Q20E
-20% -30%
-40%
-40% -50%
Anta brand Fila brand Li Ning Pou Sheng Nike China Puma Asia adidas Asia
Source: Goldman Sachs Global Investment Research, Company data Source: Goldman Sachs Global Investment Research, Company data
1 May 2020 3
Apparel & footwear OEMs: Low visibility into 2H20

Department stores and selective fashion brands most affected
In general, our global consumer team estimates a narrower revenue decline for
sportswear companies and off price retailers compared to department stores and
fashion companies in 2020 with a faster rebound in 2021. Among sportswear
companies, our global team estimates Lululemon to outperform others in 2020 due to
its favorable category exposure, followed by Nike given its strong brand and scaled
e-commerce platform.
As for retailers, our global team expects department stores such as Macy’s and Kohl’s
sales could be impacted significantly due to their offline exposure while the off price
retailers such as TJX and Ross Stores should be better positioned due to
brands/retailers’ need to clear the inventory.
As for fashion/casual brands, the team expects Fast Retailing to be relatively more
resilient due to its lower exposure to the EU/US while GAP and Inditex are likely to
record the biggest sales drop among fashion/casual brands in 2020.
Exhibit 4: Sportswear and off price retailers to be relatively more Exhibit 5: ...and also rebound faster in 2021
resilient than department stores and selective fashion brands in
2020...
TJX Sales yoy Sales yoy

Ross Stores TJX
Nordstrom Ross Stores
US retailers Macy's Nordstrom
US retailers
Kohl's Macy's
L Brands Inc. Kohl's
PVH Corp. L Brands Inc.
Ralph Lauren PVH Corp.
Fashion/ Gap Inc. Ralph Lauren
Casual Inditex Fashion/ Gap Inc.
Hennes & Mauritz Casual Inditex
Fast Retailing Hennes & Mauritz
Asics Fast Retailing
UA Asics
Sportswear
2aeb9e8b174644998c7303f5a989d953
Puma UA
adidas Sportswear Puma
adidas
Nike, Inc.
Nike, Inc.
Lulu
Lulu
-20% -15% 2020 -10% -5% 0% 5%
0% 5% 10% 15% 20% 25%
2021
Company sales growth are adjusted to reflect calendar year Company sales growth are adjusted to reflect calendar year
Source: Goldman Sachs Global Investment Research Source: Goldman Sachs Global Investment Research
OEMs’ order visibility is low with brands/retailers’ active inventory control
Due to store closures caused by COVID-19, OEMs have commented that there is
limited visibility on future order demand and delays/cancellations for existing orders,
which we believe will likely have a significant impact on sales in 2020. Our US team
introduced a framework to evaluate which brand/retailer companies will be most
impacted by inventory disruption and believes the difference in performance at the
sub-sector level is due to the length, complexity and flexibility of the supply chain for
each of these companies.
From our discussion with OEMs and based on our earlier analysis of the past events, we
1 May 2020 4
believe department stores and fashion/casual brands tend to suffer more. However,
given the unprecedented demand shock in the global market now, even sportswear
brands have highlighted proactive order management and have tried to make use of
operational flexibility when working with suppliers, as recently commented by adidas.
This implies OEMs with higher exposure to retailers such as Makalot may suffer from
more existing order cancellations in the near term, while the recovery path visibility is
also low given those brands/retailers could continue to lose share.
In addition, given activity in China appears to be slowly recovering (see our measuring
the recovery path series for details), we believe OEMs with higher exposure to China
could see a faster recovery relative to those with global exposure.
Switching Li Ning as our top idea and adding to CL; Removing Shenzhou
from CL but remain Buy
2331.HK 12m Price Target: HK$31.8 Price: HK$24.45 Upside: 29.6%
Buy - CL GS Forecast
12/19 12/20E 12/21E 12/22E
Market cap: HK$60.0bn / $7.7bn Revenue (Rmb mn) New 13,869.6 14,658.3 18,828.1 22,209.2
Enterprise value: HK$55.1bn / $7.1bn Revenue (Rmb mn) Old 13,869.6 14,874.2 18,938.7 22,264.8
3m ADTV :HK$488.9mn/ $63.0mn EBITDA (Rmb mn) 2,225.4 2,556.4 3,636.9 4,497.9
China EPS (Rmb) New 0.60 0.59 0.88 1.12
Greater China Retail EPS (Rmb) Old 0.60 0.58 0.88 1.12
P/E (X) 26.3 38.0 25.5 20.0
M&A Rank: 3 P/B (X) 5.4 6.8 5.5 4.5
Leases incl. in net debt & EV?: Yes Dividend yield (%) 1.0 0.7 1.0 1.3
Asia ex. Japan Conviction List CROCI (%) 18.2 20.9 26.1 36.2
6/19 12/19 6/20E 12/20E

EPS (Rmb) 0.32 0.28 0.20 0.39
2aeb9e8b174644998c7303f5a989d953
Source: Company data, Goldman Sachs Research estimates, FactSet. Price as of 29 Apr 2020 close.
Investment thesis
In our sports and OEM coverage, we now consider Li Ning as our top pick and add the
stock to our Conviction List as 1) compared with OEM players and Anta, Li Ning has
higher sales exposure to China where we see gradual recovery of retail sales; 2) the
company had elevated brand momentum before the COVID-19 outbreak, evidenced by
the retail sales acceleration to low 30s/mid 30s retail sales in 3Q/4Q19 from low 20s in
2Q19; 3) the company had cleaner inventory and flexible opex structure as management
commented in the annual results briefing) to drive operating margin expansion even in
2020E to 11.6% vs 10.1% in 2019; 4) in the long term, we expect to see further market
share gains opportunities, driven by enhanced store productivity, China Li Ning, kids
business and margin expansion from improving execution on merchandising and store
management (see our earlier report for additional detail). Our 2020-22E NI forecasts are
-6%/+4%/+6% vs Bloomberg consensus.
1 May 2020 5
2313.HK 12m Price Target: HK$100 Price: HK$90.35 Upside: 10.7%
Buy GS Forecast
12/19 12/20E 12/21E 12/22E
China EPS (Rmb) New 3.39 2.84 3.82 4.51
P/E (X) 26.9 29.0 21.6 18.3
M&A Rank: 3 P/B (X) 5.5 4.6 4.1 3.6
CROCI (%) 24.3 20.2 23.5 24.9
6/19 12/19 6/20E 12/20E

EPS (Rmb) 1.61 1.78 1.57 1.28
We remove Shenzhou from our Conviction List due to uncertainty in order outlook and
global demand (it is relative more exposed to global demand vs. Li Ning). Nevertheless,
we retain our Buy rating on Shenzhou as we have confidence in its potential to gain
additional market share given we expect the tough operating environment to accelerate
the industry’s consolidation trend. As for Shenzhou’s major customers, our global team
expects to see sales declines of 8%/11%/10%/2% yoy for Nike/adidas/Puma/Fast
Retailing in 2020E (adjusted on a calendar year basis) and 23%/13%/15%/14% yoy sales
rebounds in 2021E. We believe Shenzhou is relatively better positioned among the OEM
players as: 1) its customers are sportswear companies that are relatively more resilient
than other categories; 2) its strong cost efficiency and integrated business model puts it
in a good position for continuous market share gains; and 3) Shenzhou had 32%/16%
sales exposure (as of 2019) to China/Japan where the COVID-19 situation currently
appears more under control compared with the EU/US per latest data. We expect the
company to see a 9% revenue decline in 2020E followed by a 25% rebound in 2021E,
2aeb9e8b174644998c7303f5a989d953
with OP declining 13% yoy in 2020E due to the sales deleveraging impact. Since we
added Shenzhou to our Conviction List on Dec 1, 2016, the stock has risen +89.2% vs.
HSCEI +1.5%.
Earnings changes and TP methodology

For Li Ning, we revise our 2020-22E NI up by 0-2% to factor in the latest 1Q20 sales
data, while our 12m TP of HK$31.8 remains unchanged and is based on a 22x P/E
multiple (based on the avg of 12m fwd PE since mid 2014; Li Ning was loss making
before 2015) applied to our 2024E EPS, discounted back to 2020-21E. Our TP implies
30% upside (vs 10% for coverage average).
For Shenzhou, we revise our 2020-22E NI down by 1-3% to factor in weaker order
demand, while our 12m TP of HK$100 remains unchanged and is based on 23x 2021E
P/E. Our TP implies 11% upside.
1 May 2020 6
Key risks
For Li Ning, we see the key risks to our investment thesis and target price as: 1)
COVID-19 development in China; 2) fashion risks for China Li Ning, which has a higher
fashion sports element in the design and thus is relatively more impacted by fashion
trends and changing consumers’ preference vs peers; 3) higher inventory level – if the
company failed to clean inventory in line with our current forecasts this could result in
higher inventory level and negatively impact the business; 4) weaker product launches;
and 5) weaker-than-expected opex control.
For Shenzhou, we see the key risks to our investment thesis and target price as: 1)
COVID-19 development globally; 2) weaker-than-expected cost control, which could lead
to earnings risks; 3) slower ramp-up in production in Vietnam/Cambodia – if the company
delayed the ramp up process of its new capacity, this could lead to slower capacity
growth in 2021E; and 4) FX volatility.
Financials
For Li Ning, we forecast sales to grow 6% yoy in 2020 as we expect gradual recovery of
retail sales and OPM expansion to 11.6% from 10.1% in 2019 thanks to its flexible opex
structure and clean inventory level. The company has a strong balance sheet with no
debt and c.Rmb6bn cash at the end of 2019, which we believe will allow the company to
maintain 25% dividend payout ratio in 2020E.
For Shenzhou, we expect to see 9% revenue decline for Shenzhou yoy in 2020E and
OPM contraction to 21% from 21.8% in 2019 due to the deleveraging impact and lower
utilization rate. The company has a strong balance sheet with a net cash position, which
we believe will allow the company to maintain 50% dividend payout ratio in 2020E.
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1 May 2020 7
Exhibit 6: Li Ning summary financials
Profit model (Rmb mn) 12/19 12/20E 12/21E 12/22E Balance sheet (Rmb mn) 12/19 12/20E 12/21E 12/22E
Total revenue 13,869.6 14,658.3 18,828.1 22,209.2 Cash & equivalents 5,962.6 5,506.5 8,556.0 11,049.1
Cost of goods sold (7,064.2) (7,418.7) (9,305.9) (10,881.5) Accounts receivable 726.1 1,319.3 1,318.0 1,554.6
SG&A (5,038.6) (5,175.3) (6,381.3) (7,334.5) Inventory 1,407.3 1,632.1 1,814.7 2,121.9
R&D (362.5) (369.1) (470.7) (555.2) Other current assets 443.4 443.4 443.4 443.4
Other operating profit/(expense) -- -- -- -- Total current assets 8,539.3 8,901.3 12,132.0 15,169.0
EBITDA 2,225.4 2,556.4 3,636.9 4,497.9 Net PP&E 2,020.0 1,975.4 2,274.7 2,479.2
Depreciation & amortization (821.0) (861.2) (966.7) (1,059.9) Net intangibles 265.5 261.2 271.8 282.3
EBIT 1,404.4 1,695.2 2,670.2 3,438.0 Total investments 1,056.9 1,119.4 1,187.0 1,254.5
Interest income 28.9 46.9 43.3 67.3 Other long-term assets 665.8 665.8 665.8 665.8
Interest expense (59.0) (72.7) (86.5) (95.8) Total assets 12,547.5 12,923.0 16,531.2 19,850.9
Income/(loss) from uncons. subs. 343.5 62.5 67.6 67.6
Others 138.8 152.7 137.4 147.1 Accounts payable 3,815.8 3,115.9 4,466.8 5,223.1
Pretax profits 1,856.5 1,884.6 2,832.0 3,624.1 Short-term debt 0.0 -- -- --
Income tax (357.4) (419.1) (649.6) (835.8) Other current liabilities 564.0 596.0 765.6 903.1
Minorities 0.0 -- -- -- Total current liabilities 4,716.6 4,082.4 5,696.1 6,652.5
Long-term debt -- -- -- --
Net income pre-preferred dividends 1,499.1 1,465.5 2,182.4 2,788.3 Other long-term liabilities 149.2 149.2 149.2 149.2
Preferred dividends -- -- -- -- Total long-term liabilities 706.7 858.2 1,036.4 1,156.3
Net income (pre-exceptionals) 1,499.1 1,465.5 2,182.4 2,788.3 Total liabilities 5,423.3 4,940.7 6,732.5 7,808.9
Post-tax exceptionals -- -- -- --
Net income 1,499.1 1,465.5 2,182.4 2,788.3 Preferred shares -- -- -- --
Total common equity 7,121.6 7,979.8 9,796.2 12,039.5
EPS (basic, pre-except) (Rmb) 0.60 0.59 0.88 1.12 Minority interest 2.6 2.6 2.6 2.6
EPS (basic, post-except) (Rmb) 0.60 0.59 0.88 1.12
EPS (diluted, post-except) (Rmb) 0.60 0.59 0.88 1.12 Total liabilities & equity 12,547.5 12,923.0 16,531.2 19,850.9
DPS (Rmb) 0.15 0.15 0.22 0.28
Dividend payout ratio (%) 25.0 25.0 25.0 25.0 BVPS (Rmb) 2.94 3.30 4.05 4.97
Free cash flow yield (%) 6.9 0.0 6.3 5.6
Growth & margins (%) 12/19 12/20E 12/21E 12/22E Ratios 12/19 12/20E 12/21E 12/22E
Sales growth 32.0 5.7 28.4 18.0 CROCI (%) 18.2 20.9 26.1 36.2
EBITDA growth 103.4 14.9 42.3 23.7 ROE (%) 23.2 19.4 24.6 25.5
EBIT growth 105.7 20.7 57.5 28.8 ROA (%) 14.1 11.5 14.8 15.3
Net income growth 109.6 (2.2) 48.9 27.8 ROACE (%) 20.6 21.9 28.9 33.4
EPS growth 106.0 (2.2) 48.9 27.8 Inventory days 68.4 74.8 67.6 66.0
Gross margin 49.1 49.4 50.6 51.0 Receivables days 22.3 25.5 25.6 23.6
EBITDA margin 16.0 17.4 19.3 20.3 Payable days 166.1 170.5 148.7 162.5
EBIT margin 10.1 11.6 14.2 15.5 Net debt/equity (%) (71.1) (55.5) (73.5) (79.0)
Interest cover - EBIT (X) 46.6 65.6 61.8 120.7
Cash flow statement (Rmb mn) 12/19 12/20E 12/21E 12/22E Valuation 12/19 12/20E 12/21E 12/22E
Net income pre-preferred dividends 1,499.1 1,465.5 2,182.4 2,788.3
D&A add-back 821.0 861.2 966.7 1,059.9 P/E (analyst) (X) 26.3 38.0 25.5 20.0
Minorities interests add-back 0.0 -- -- -- P/B (X) 5.4 6.8 5.5 4.5
Net (inc)/dec working capital 1,274.0 (1,518.0) 1,169.7 212.4 EV/EBITDA (X) 15.4 20.0 13.3 10.3
Other operating cash flow (90.7) 32.1 169.5 137.5 EV/GCI (X) 4.1 4.9 4.4 3.9
Cash flow from operations 3,503.5 840.8 4,488.3 4,198.1 Dividend yield (%) 1.0 0.7 1.0 1.3
2aeb9e8b174644998c7303f5a989d953
Capital expenditures (454.4) (474.3) (542.9) (567.6)
Acquisitions -- -- -- --
Divestitures -- -- -- --
Others (118.9) (62.5) (67.6) (67.6)
Cash flow from investments (573.3) (536.8) (610.5) (635.1)
Dividends paid (common & pref) (211.9) (374.4) (366.0) (545.1)

Inc/(dec) in debt -- -- -- --
Common stock issuance (repurchase) -- -- -- --
Other financing cash flows (101.0) -- -- --
Cash flow from financing (639.3) (760.1) (828.3) (1,069.9)
Total cash flow 2,290.8 (456.1) 3,049.5 2,493.1 Note: Last actual year may include reported and estimated data.
Source: Company data, Goldman Sachs Research estimates.
Source: Company data, Goldman Sachs Global Investment Research
1 May 2020 8
Exhibit 7: Shenzhou summary financials
Profit model (Rmb mn) 12/19 12/20E 12/21E 12/22E Balance sheet (Rmb mn) 12/19 12/20E 12/21E 12/22E
Total revenue 22,665.3 20,581.3 25,685.4 30,129.0 Cash & equivalents 11,025.0 12,309.9 12,693.6 16,057.1
Cost of goods sold (15,789.3) (14,679.7) (17,722.9) (20,638.4) Accounts receivable 3,648.8 3,293.0 4,623.4 4,519.4
SG&A (1,930.5) (1,584.8) (1,939.2) (2,267.2) Inventory 5,282.4 4,991.1 6,734.7 6,810.7
R&D 0.0 0.0 0.0 0.0 Other current assets 538.1 538.1 538.1 538.1
EBITDA 5,891.6 5,448.2 7,264.2 8,530.9 Net PP&E 9,592.3 10,531.7 11,101.4 11,614.3
Depreciation & amortization (946.1) (1,131.4) (1,241.0) (1,307.4) Net intangibles 101.4 88.7 76.0 63.3
EBIT 4,945.6 4,316.8 6,023.2 7,223.4 Total investments 18.2 18.2 18.2 18.2
Interest income 223.6 251.9 271.9 254.2 Other long-term assets 1,648.7 1,499.0 1,499.0 1,499.0
Others 426.7 342.1 374.6 392.5 Accounts payable 880.9 734.0 1,152.0 1,093.8
Pretax profits 5,571.7 4,886.5 6,645.6 7,845.9 Short-term debt 3,192.2 3,192.2 3,192.2 3,192.2
Income tax (613.2) (611.1) (897.5) (1,059.6) Other current liabilities 1,485.1 1,485.1 1,485.1 1,485.1
Minorities 136.7 0.0 0.0 -- Total current liabilities 5,584.7 5,411.2 5,829.2 5,771.1
Long-term debt 776.4 776.4 776.4 776.4
Preferred dividends -- -- -- -- Total long-term liabilities 1,078.8 955.6 955.6 955.6
EPS (basic, pre-except) (Rmb) 3.39 2.84 3.82 4.51 Minority interest 18.9 18.9 18.9 18.9
EPS (basic, post-except) (Rmb) 3.39 2.84 3.82 4.51
EPS (diluted, post-except) (Rmb) 3.39 2.84 3.82 4.51 Total liabilities & equity 31,854.9 33,269.7 37,284.3 41,120.0
DPS (Rmb) 1.71 1.43 1.92 2.27
Dividend payout ratio (%) 50.3 50.3 50.3 50.3 BVPS (Rmb) 16.75 17.88 20.28 22.87
Sales growth 8.2 (9.2) 24.8 17.3 CROCI (%) 24.3 20.2 23.5 24.9
EBITDA growth 11.0 (7.5) 33.3 17.4 ROE (%) 21.5 16.4 20.0 20.9
EBIT growth 11.0 (12.7) 39.5 19.9 ROA (%) 17.2 13.1 16.3 17.3
Interest cover - EBIT (X) NM NM NM NM
Cash flow statement (Rmb mn) 12/19 12/20E 12/21E 12/22E Valuation 12/19 12/20E 12/21E 12/22E
D&A add-back 946.1 1,131.4 1,241.0 1,307.4 P/E (analyst) (X) 26.9 29.0 21.6 18.3
Minorities interests add-back (136.7) 0.0 0.0 -- P/B (X) 5.5 4.6 4.1 3.6
Net (inc)/dec working capital (60.7) 500.1 (2,656.0) (30.1) EV/EBITDA (X) 22.1 21.2 15.9 13.1
Other operating cash flow (239.5) (221.9) (241.9) (224.2) EV/GCI (X) 5.4 4.5 3.8 3.5
Cash flow from operations 5,604.4 5,685.2 4,091.2 7,839.5 Dividend yield (%) 1.9 1.7 2.3 2.8
2aeb9e8b174644998c7303f5a989d953
Capital expenditures (2,841.4) (2,058.1) (1,798.0) (1,807.7)
Others 195.1 221.9 241.9 224.2
Cash flow from investments (2,646.3) (1,836.3) (1,556.1) (1,583.6)
Dividends paid (common & pref) (2,300.5) (2,563.9) (2,151.4) (2,892.4)

Inc/(dec) in debt 1,451.8 -- -- --
Other financing cash flows 239.9 -- -- --
Cash flow from financing (608.7) (2,563.9) (2,151.4) (2,892.4)
Total cash flow 2,349.4 1,285.0 383.7 3,363.5 Note: Last actual year may include reported and estimated data.
1 May 2020 9
Downgrade Makalot to Sell from Neutral
1477.TW 12m Price Target: NT$99 Price: NT$127.5 Downside: 22.4%
Sell GS Forecast
12/19 12/20E 12/21E 12/22E
Market cap: NT$28.0bn / $942.7mn Revenue (NT$ mn) New 27,047.5 24,347.9 25,078.3 27,862.0
Enterprise value: NT$28.1bn / $945.6mn Revenue (NT$ mn) Old 27,047.5 24,531.1 26,758.5 29,188.2
3m ADTV :NT$303.2mn/ $10.1mn EBITDA (NT$ mn) 3,008.5 2,346.1 2,568.7 2,963.2
Taiwan EPS (NT$) New 8.66 6.25 6.98 8.53
Greater China Retail EPS (NT$) Old 8.66 6.30 7.69 9.16
P/E (X) 21.0 20.4 18.3 15.0
M&A Rank: 3 P/B (X) 4.4 3.1 2.9 2.8
Leases incl. in net debt & EV?: No Dividend yield (%) 3.3 3.4 4.9 6.0
CROCI (%) 16.5 14.1 17.4 20.7
12/19 3/20E 6/20E 9/20E

EPS (NT$) 1.89 2.06 1.04 1.93
Investment thesis
We downgrade Makalot to Sell from Neutral due to its sales exposure to US retailers
and selective fashion brands (i.e., GAP which appears to be facing greater sales and
liquidity pressure than other brands). As for Makalot’s major customers, as we discuss
earlier in this note, our global consumer team expects to see sales decline of
17%/14%/2% yoy for GAP/Kohl’s/Fast Retailing in 2020E (adjusted on a calendar year
basis) followed by 9%/11%/14% yoy rebound in 2021E. We believe Makalot is facing
significant challenges such as:
n Department stores’ sales are under the most pressure among different categories of
US brands/retailers due to their dependence on offline traffic. Makalot has sales
2aeb9e8b174644998c7303f5a989d953
exposure to department stores (e.g. 9% sales exposure to Kohl’s in 2019) and our
US team believe the inventory risks and liquidity stress at department stores could
weigh if store closures / revenue declines stretch to several months;
n Department stores have better flexibility for order cancellation than brand
customers. In the current environment we believe department stores could cancel
orders they already placed in 2Q20, which implies bigger revenue decline in the near
term for Makalot;
n Selective fashion brands such as GAP are also facing sales and liquidity pressure and
Makalot has 26% sales exposure to GAP in 2019. GAP said it needs to take
additional actions to both preserve existing liquidity and seek additional sources of
liquidity in order to sustain operations. It is taking action to preserve cash, including
implementing furloughs of roughly 80,000 store employees, cutting executive pay
and not paying April rent for its temporarily closed stores.
n Makalot had 75% sales exposure to the US as of 2019, where currently visibility on
the COVID-19 situation is still low. In 2020E, we expect 10% yoy revenue decline for
Makalot with 27% OP yoy decline due to margin pressure.
1 May 2020 10
Overall, our 2020-22E NI forecasts are 3%/6%/7% below Bloomberg consensus, which
we believe is driven by our view that it will see more order cancellations and that future
order demand from retail customers and selective fashion brands will weigh on
revenues and lead to further operating deleverage accordingly.
Upside risks and what would make us more positive?

As explained in more detail below, we would consider adopting a more constructive
stance on Makalot if the following upside risks to our investment thesis and target price
were to materialize: 1) the COVID-19 situation were to improve faster-than-expected in
the US; 2) if order demand from customers is stronger-than-expected; 3) if the company
adopts stronger cost controls; and 4) if Makalot benefits from the faster-than-expected
industry consolidation trend.
n COVID-19 development, especially in US: Makalot’s major sales exposure is in the

US. Thus, a better-than-expected retail sales recovery trend could lead to upside risk
to our earnings.
n Better-than-expected order demand from customers such as GAP, retail
customers: We believe GAP and department stores are facing the most pressure
among different categories of customers currently, as discussed earlier in this
report. If order demand were to come in stronger-than-expected this could result in
higher earnings growth than we currently forecast.
n Stronger-than-expected cost controls: We expect to see margin erosion as a
result of deleveraging impact and weaker product mix. If Makalot adopted stronger
cost control measures, this could be an upside risk on a stronger earnings.
n Faster-than-expected industry consolidation: We believe smaller players would
suffer the most in the current situation due to their relatively limited financial
resources. If Makalot benefits from the faster-than-expected industry consolidation
trend, this would likely lead to higher-than-expected market share gains.
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n FX volatility: The company receives orders priced in USD while products are
manufactured in Vietnam/Indonesia/Cambodia/China/Philippines, implying FX risk on
earnings.
Earnings changes and TP methodology

Our revised 12m TP of NT$99 (vs NT$108 prior) incorporates 1-9% earnings cuts for
2020-22E, driven by the weaker order outlook facing the company, and a lower target
multiple of 15x P/E applied to average 2020-21 EPS (vs 16x before) due to increased
order demand uncertainty. Our target multiple is based on a 10% discount to average
PE since 2008. Our new TP implies 20% downside (vs 10% upside for coverage
average), the lowest potential return in our coverage.
Financials
We expect to see 10% revenue decline for Makalot yoy in 2020E and OPM contraction
to 7.5% from 9.2% in 2019 due to the deleveraging impact and lower utilization rate. The
company had a net cash position at end of 2019 (Makalot will hold board meeting to
discuss the 2019 dividend in May) and we expect in 2020E company will still pay the
1 May 2020 11
2019 dividend based on 70% payout ratio and capex of NT$450mn due to the
construction of factory that was impacted by earlier fire incident and new capacity in
Indonesia, which will lead to further pressure on cash flows on top of the earnings
decline in 2020E.
Exhibit 8: Makalot summary financials

Profit model (NT$ mn) 12/19 12/20E 12/21E 12/22E Balance sheet (NT$ mn) 12/19 12/20E 12/21E 12/22E
Total revenue 27,047.5 24,347.9 25,078.3 27,862.0 Cash & equivalents 1,838.6 850.8 2,233.8 2,387.4
Cost of goods sold (21,622.3) (19,926.8) (20,324.0) (22,384.9) Accounts receivable 596.3 1,460.9 752.3 1,114.5
SG&A (2,935.4) (2,593.8) (2,696.6) (2,996.0) Inventory 3,402.9 3,188.3 3,251.8 3,581.6
R&D 0.0 0.0 0.0 0.0 Other current assets 3,299.6 3,299.6 3,299.6 3,299.6
EBITDA 3,008.5 2,346.1 2,568.7 2,963.2 Net PP&E 4,867.8 4,793.3 4,602.6 4,515.6
Depreciation & amortization (518.7) (518.7) (511.0) (482.0) Net intangibles 32.0 37.8 43.6 38.6
EBIT 2,489.8 1,827.4 2,057.7 2,481.2 Total investments 173.0 193.1 233.1 273.1
Interest income 13.2 13.2 13.2 13.2 Other long-term assets 542.9 542.9 542.9 542.9
Others 42.9 36.0 0.0 0.0 Accounts payable 1,812.1 1,670.0 1,703.3 1,876.0
Pretax profits 2,449.9 1,769.0 1,976.1 2,411.6 Short-term debt 818.9 818.9 718.9 618.9
Income tax (520.9) (376.1) (420.2) (512.8) Other current liabilities 2,522.5 2,236.5 2,322.9 2,551.4
Minorities (24.5) (18.0) (20.2) (24.4) Total current liabilities 5,153.5 4,725.3 4,745.0 5,046.3
Long-term debt -- -- -- --
Preferred dividends -- -- -- -- Total long-term liabilities 402.1 402.1 402.1 402.1
EPS (basic, pre-except) (NT$) 8.66 6.25 6.98 8.53 Minority interest 102.3 120.2 140.5 164.8
EPS (basic, post-except) (NT$) 8.66 6.25 6.98 8.53
EPS (diluted, post-except) (NT$) 8.66 6.25 6.98 8.53 Total liabilities & equity 14,753.2 14,366.8 14,959.8 15,753.3
DPS (NT$) 6.06 4.38 6.29 7.67
Dividend payout ratio (%) 70.0 70.0 90.0 90.0 BVPS (NT$) 41.37 41.48 43.99 46.12
Sales growth 13.0 (10.0) 3.0 11.1 CROCI (%) 16.5 14.1 17.4 20.7
EBITDA growth 28.0 (22.0) 9.5 15.4 ROE (%) 21.3 15.1 16.3 18.9
EBIT growth 25.9 (26.6) 12.6 20.6 ROA (%) 13.4 9.4 10.5 12.2
Interest cover - EBIT (X) 23.7 16.0 16.9 22.6
Cash flow statement (NT$ mn) 12/19 12/20E 12/21E 12/22E Valuation 12/19 12/20E 12/21E 12/22E
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D&A add-back 518.7 518.7 511.0 482.0 P/E (analyst) (X) 21.0 20.4 18.3 15.0
Minorities interests add-back 24.5 18.0 20.2 24.4 P/B (X) 4.4 3.1 2.9 2.8
Net (inc)/dec working capital 18.9 (792.1) 678.3 (519.2) EV/EBITDA (X) 13.0 12.0 10.4 8.9
Other operating cash flow (775.7) (324.0) 26.2 164.2 EV/GCI (X) 3.5 2.2 2.2 2.0
Cash flow from operations 1,690.9 795.5 2,771.4 2,025.8 Dividend yield (%) 3.3 3.4 4.9 6.0
Capital expenditures (481.4) (450.0) (326.0) (390.1)

Others (91.4) -- -- --
Cash flow from investments (572.8) (450.0) (326.0) (390.1)
Dividends paid (common & pref) (1,486.6) (1,333.2) (962.4) (1,382.1)

Inc/(dec) in debt 422.4 -- (100.0) (100.0)
Other financing cash flows (186.9) -- -- --
Cash flow from financing (1,251.2) (1,333.2) (1,062.4) (1,482.1)
Total cash flow (133.1) (987.7) 1,382.9 153.6 Note: Last actual year may include reported and estimated data.
1 May 2020 12
Maintain Anta at Buy, Eclat at Neutral
2020.HK 12m Price Target: HK$78 Price: HK$65.45 Upside: 18.8%
Buy GS Forecast
12/19 12/20E 12/21E 12/22E
China EPS (Rmb) New 1.99 2.02 2.98 3.88
P/E (X) 25.5 29.5 20.1 15.4
M&A Rank: 3 P/B (X) 6.8 6.9 5.9 4.9
CROCI (%) 32.9 25.5 30.8 47.1
6/19 12/19 6/20E 12/20E

EPS (Rmb) 0.92 1.06 0.71 1.32
1476.TW 12m Price Target: NT$260 Price: NT$300 Downside: 13.3%
Neutral GS Forecast
12/19 12/20E 12/21E 12/22E
Market cap: NT$82.3bn / $2.8bn Revenue (NT$ mn) New 28,125.1 26,689.2 28,412.3 31,747.9
Enterprise value: NT$81.9bn / $2.8bn Revenue (NT$ mn) Old 28,125.1 29,383.4 33,008.2 37,041.3
3m ADTV :NT$388.6mn/ $12.9mn EBITDA (NT$ mn) 6,309.8 5,713.7 6,190.5 7,258.6
Taiwan EPS (NT$) New 15.67 14.04 14.88 17.58
Greater China Retail EPS (NT$) Old 15.67 15.54 18.60 21.77
P/E (X) 25.3 21.4 20.2 17.1
M&A Rank: 3 P/B (X) 6.0 4.3 4.0 3.7
Leases incl. in net debt & EV?: No Dividend yield (%) 2.8 3.3 3.7 4.4
CROCI (%) 21.7 18.8 19.6 21.0
2aeb9e8b174644998c7303f5a989d953
12/19 3/20E 6/20E 9/20E
EPS (NT$) 4.14 3.10 3.97 3.36
We remain Buy rated on Anta as we believe the China domestic business should record
a healthy recovery trend, although Amer could see more earnings risk in 2020E. In the
long term, we still see a balanced brand portfolio and strong execution driving market
share gains in China. Our revised 12m TP is HK$78 (previously HK$76) incorporates our
3-4% upward earnings revision for 2020-22E post the 1Q20 trading update and is based
on an unchanged SOTP valuation methodology. Our TP implies 20% upside (vs 10%
upside for coverage average). Key risks: Less-than-expected contribution from Amer
Sports, weaker Fila growth, lower retail sales growth of the core Anta brand and OPEX
control.
We maintain Eclat as Neutral due to its sales exposure to sportswear brands such as
Lululemon and Nike, which are relatively more resilient, while it still has c.40% of its
sales exposed to retail customers. Eclat’s customer base is mixed with: 1) solid
exposure to sportswear (our global team expects to see sales decline of 8%/17% for
1 May 2020 13
Nike and Under Armour but 2% growth for Lululemon in 2020E, followed by
23%/21%/23% sales rebound in 2021E, but 2) still around 40% of its sales from retail
customers, which we note led to huge order volatility back in 2017-18. Besides, Eclat
also had 58%/7% direct revenue exposure to the US/EU in 2019, where current visibility
on the COVID-19 situation is still low. In 2020E, we expect to see 5% yoy revenue
decline for Eclat with 11% yoy OP decline due to margin pressures. Our revised 12m TP
for Eclat of NT$260 (vs NT$295 before) incorporates 10-20% earnings cuts for
2020-22E, driven by weaker order demand facing the company, and a lower target
multiple of 18x P/E applied to average 2020-21E EPS (vs 19x before) due to increased
order demand uncertainty. Our new TP implies 10% downside (vs 10% upside for
coverage average). Key risks: stronger/weaker premium sportswear/functional apparel
demand, faster/lower capacity ramp up, better/weaker product mix, and FX volatility.
Important reports on OEMs’ demand outlook
Americas Branded Consumer Goods: Apparel & Accessories: Assessing the risk of
inventory disruption in apparel, and updating our COVID tracker
Americas Branded Consumer Goods: Apparel & Accessories: Stress testing liquidity and
introducing our COVID-19 retail response tracker
Nike Inc. (NKE): Mid-quarter check up: Coronavirus, brand momentum, and industry
checks
Asia Pacific Textile, Apparel & Footwear: Major earnings cuts in 2020E on supply chain
disruption and weaker global demand; Makalot d/g to Neutral
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1 May 2020 14
Exhibit 9: Comparison of OEM companies

2019 Makalot Eclat Shenzhou Regina Miracle Crystal Yue Yuen Stella
Ticker 1477.TW 1476.TW 2313.HK 2199.HK 2232.HK 0551.HK 1836.HK
Garment
Garment Fabric, garment Fabric, garment OEM/ODM, Footwear Footwear
Business description Garment OEM/ODM
OEM/ODM OEM/ODM OEM/ODM footwear OEM/ODM OEM/ODM, retail
OEM/ODM
c.35% of the fabric

c.7% of fabric
is for internal
Degree of integration supplied from its 100% NA NA NA NA
garment
JV
manufacturing
L Brand (24%),
Nike (>15%), Nike (30%), Uniqlo Uniqlo (37%), H&M,
Gap (26%), Kohl’s Uniqlo, PVH, Nike (25%),
Under Armour, (22%), adidas M&S, A&F, Gap, Nike (32% of OEM),
Sales breakdown by client (2019) (9%), Target Hanes Brands, Deckers (16%),
lululemon, JC (22%), Puma Levi’s, Target, L adidas (29%)
(14%), GU (19%) adidas, Under Clarks, VFC
Penny, Macy’s (11%) Brands
Armour
OEM/ODM: 59% Footwear OEM:

Garment: 70%
Sales breakdown by businesses (2019) Garment: 100% Garment: 100% Garment, Footwear Garment: 100% Retail & wholesale: 98%
Fabric: 30%
41% Retail: 2%
Bras and intimate

wear:78%
Lifestyle Wear: 38%
Fashion: 73% Bra pads and other
Sportswear (72%), Denim: 25% Athletic (76% of Fashion (39%),
Functional sports: Mostly functional molded
Sales breakdown by product (2019) Casual (24%), Intimate: 17% OEM), Casual & Casual (26%),
27% sportswear products:8%
Lingerie (4%) Sweater: 10% others (24%) Sports (36%)
Functional sports
Sportswear: 10%
products:14%
North America:
Japan: 16% For OEM:
Americas: 58% US: 49% Asia pacific: 40% 51%
US: 75% China: 32% China: 12%
Asia: 29% China 13% US: 38% Europe: 28%
Sales breakdown by geography (2019) Asia:24% Europe: 17% US: 35%
Europe: 7% Europe: 12% Europe: 18% China: 12%
Europe:1% US: 15% Europe: 28%
Others: 6% Others:26% Others: 4% Other Asia: 6%
Others: 20% Others: 25%
Others: 3%
-Fabric -Fabric
Vietnam:40% Vietnam: 58% China: 52%
Vietnam: 44% China: 45%
Indonesia: 32% Taiwan: 42% Vietnam: 48%
China: 40% China 34% Indonesia: 39% South East Asia
Production base breakdown (2019) Cambodia: 20% - Garment - Garment
Vietnam: 60% Others: 66% China: 13% and Bangladesh:
China: 4% Vietnam: 78% China: 68%
Others: 4% 55%
Philippines: 4% Lesotho: 13% Cambodia: 15%
Cambodia: 9% Vietnam: 17%
24.9% (total
Gross margin (2019) 20.1% 28.9% 30.3% 21.4% 18.8% company); 18.5% 19.0%
(OEM only)
4.6% (total
EBIT margin (2019) 9.2% 19.5% 21.8% 5.8% 6.9% company); 4.1% 4.9%
(OEM only)
Source: Company data
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1 May 2020 15
Disclosure Appendix
Reg AC
I, Michelle Cheng, hereby certify that all of the views expressed in this report accurately reflect my personal views about the subject company or
companies and its or their securities. I also certify that no part of my compensation was, is or will be, directly or indirectly, related to the specific
recommendations or views expressed in this report.
Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs’ Global Investment Research division.
GS Factor Profile
The Goldman Sachs Factor Profile provides investment context for a stock by comparing key attributes to the market (i.e. our coverage universe) and its
sector peers. The four key attributes depicted are: Growth, Financial Returns, Multiple (e.g. valuation) and Integrated (a composite of Growth, Financial
Returns and Multiple). Growth, Financial Returns and Multiple are calculated by using normalized ranks for specific metrics for each stock. The
normalized ranks for the metrics are then averaged and converted into percentiles for the relevant attribute. The precise calculation of each metric may
vary depending on the fiscal year, industry and region, but the standard approach is as follows:
Growth is based on a stock’s forward-looking sales growth, EBITDA growth and EPS growth (for financial stocks, only EPS and sales growth), with a
higher percentile indicating a higher growth company. Financial Returns is based on a stock’s forward-looking ROE, ROCE and CROCI (for financial
stocks, only ROE), with a higher percentile indicating a company with higher financial returns. Multiple is based on a stock’s forward-looking P/E, P/B,
price/dividend (P/D), EV/EBITDA, EV/FCF and EV/Debt Adjusted Cash Flow (DACF) (for financial stocks, only P/E, P/B and P/D), with a higher percentile
indicating a stock trading at a higher multiple. The Integrated percentile is calculated as the average of the Growth percentile, Financial Returns
percentile and (100% - Multiple percentile).
Financial Returns and Multiple use the Goldman Sachs analyst forecasts at the fiscal year-end at least three quarters in the future. Growth uses inputs
for the fiscal year at least seven quarters in the future compared with the year at least three quarters in the future (on a per-share basis for all metrics).
For a more detailed description of how we calculate the GS Factor Profile, please contact your GS representative.
M&A Rank
Across our global coverage, we examine stocks using an M&A framework, considering both qualitative factors and quantitative factors (which may vary
across sectors and regions) to incorporate the potential that certain companies could be acquired. We then assign a M&A rank as a means of scoring
companies under our rated coverage from 1 to 3, with 1 representing high (30%-50%) probability of the company becoming an acquisition target, 2
representing medium (15%-30%) probability and 3 representing low (0%-15%) probability. For companies ranked 1 or 2, in line with our standard
departmental guidelines we incorporate an M&A component into our target price. M&A rank of 3 is considered immaterial and therefore does not
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Disclosures
Coverage group(s) of stocks by primary analyst(s)
Michelle Cheng: Greater China Retail.
Greater China Retail: Anta Sports Products, Chow Tai Fook Jewellery Group, Eclat Textile Co., Gourmet Master Co., Haidilao International Holding, Li &
Fung, Li Ning Co., Luk Fook Holdings, Makalot Industrial Co, Pou Sheng International Holdings, President Chain Store, Sa Sa International Holdings,
2aeb9e8b174644998c7303f5a989d953
Shenzhou International Group, Stella International Holdings, Topsports Intl Holdings, Uni-President Enterprises, Xiabuxiabu Catering Management, Yihai
International Holding, Yue Yuen Industrial, Yum China Holdings.
Company-specific regulatory disclosures

The following disclosures relate to relationships between The Goldman Sachs Group, Inc. (with its affiliates, “Goldman Sachs”) and companies covered
by the Global Investment Research Division of Goldman Sachs and referred to in this research.
Goldman Sachs beneficially owned 1% or more of common equity (excluding positions managed by affiliates and business units not required to be
aggregated under US securities law) as of the second most recent month end: Li Ning Co. (HK$24.45)
Goldman Sachs has received compensation for investment banking services in the past 12 months: Li Ning Co. (HK$24.45)
Goldman Sachs expects to receive or intends to seek compensation for investment banking services in the next 3 months: Anta Sports Products
(HK$65.45), Li Ning Co. (HK$24.45) and Shenzhou International Group (HK$90.35)
Goldman Sachs had an investment banking services client relationship during the past 12 months with: Anta Sports Products (HK$65.45) and Li Ning
Co. (HK$24.45)
Goldman Sachs had a non-securities services client relationship during the past 12 months with: Anta Sports Products (HK$65.45), Eclat Textile Co.
(NT$300.00), Li Ning Co. (HK$24.45), Makalot Industrial Co (NT$127.50) and Shenzhou International Group (HK$90.35)
Goldman Sachs makes a market in the securities or derivatives thereof: Li Ning Co. (HK$24.45)
Distribution of ratings/investment banking relationships

Goldman Sachs Investment Research global Equity coverage universe
Rating Distribution Investment Banking Relationships

Buy Hold Sell Buy Hold Sell
Global 46% 39% 15% 65% 57% 52%
1 May 2020 16
As of April 9, 2020, Goldman Sachs Global Investment Research had investment ratings on 3,023 equity securities. Goldman Sachs assigns stocks as
Buys and Sells on various regional Investment Lists; stocks not so assigned are deemed Neutral. Such assignments equate to Buy, Hold and Sell for
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investment banking services within the previous twelve months.
Price target and rating history chart(s)
2aeb9e8b174644998c7303f5a989d953
Regulatory disclosures
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1 May 2020 17
public offerings in prior periods; directorships; for equity securities, market making and/or specialist role. Goldman Sachs trades or may trade as a
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2020 05 01 2331 GoldmanSachs

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on Sunday May 31 2020 08:35:36 AM, Sessionid:en4ydjxuix4uwacliz0j44bz

1 May 2020 | 11:15PM HKT

Asia Paciﬁc Textile, Apparel & Footwear

Prefer pure China play amid global demand uncertainty:

Goldman Sachs Asia Paciﬁc Textile, Apparel & Footwear

Downgrade Makalot to Sell from Neutral 10

Maintain Anta at Buy, Eclat at Neutral 13

Goldman Sachs Asia Paciﬁc Textile, Apparel & Footwear

Exhibit 1: Summary of TPs, ratings and earnings changes

*Denotes on our regional Conviction List

Source: Goldman Sachs Global Investment Research, Datastream

China sportswear: Expecting a U-shaped recovery

Retail sales growth yoy

Goldman Sachs Asia Paciﬁc Textile, Apparel & Footwear

Apparel & footwear OEMs: Low visibility into 2H20

TJX Sales yoy Sales yoy

OEMs’ order visibility is low with brands/retailers’ active inventory control

Goldman Sachs Asia Paciﬁc Textile, Apparel & Footwear

2331.HK 12m Price Target: HK$31.8 Price: HK$24.45 Upside: 29.6%

6/19 12/19 6/20E 12/20E

Goldman Sachs Asia Paciﬁc Textile, Apparel & Footwear

2313.HK 12m Price Target: HK$100 Price: HK$90.35 Upside: 10.7%

6/19 12/19 6/20E 12/20E

Earnings changes and TP methodology

Goldman Sachs Asia Paciﬁc Textile, Apparel & Footwear

Goldman Sachs Asia Paciﬁc Textile, Apparel & Footwear

Exhibit 6: Li Ning summary ﬁnancials

Dividends paid (common & pref) (211.9) (374.4) (366.0) (545.1)

Source: Company data, Goldman Sachs Global Investment Research

Goldman Sachs Asia Paciﬁc Textile, Apparel & Footwear

Exhibit 7: Shenzhou summary ﬁnancials

Dividends paid (common & pref) (2,300.5) (2,563.9) (2,151.4) (2,892.4)

Source: Company data, Goldman Sachs Global Investment Research

Goldman Sachs Asia Paciﬁc Textile, Apparel & Footwear

Downgrade Makalot to Sell from Neutral

1477.TW 12m Price Target: NT$99 Price: NT$127.5 Downside: 22.4%

12/19 3/20E 6/20E 9/20E

Goldman Sachs Asia Paciﬁc Textile, Apparel & Footwear

Upside risks and what would make us more positive?

n COVID-19 development, especially in US: Makalot’s major sales exposure is in the

Earnings changes and TP methodology

Goldman Sachs Asia Paciﬁc Textile, Apparel & Footwear

Exhibit 8: Makalot summary ﬁnancials

Capital expenditures (481.4) (450.0) (326.0) (390.1)

Dividends paid (common & pref) (1,486.6) (1,333.2) (962.4) (1,382.1)

Source: Company data, Goldman Sachs Global Investment Research

Goldman Sachs Asia Paciﬁc Textile, Apparel & Footwear

Maintain Anta at Buy, Eclat at Neutral

2020.HK 12m Price Target: HK$78 Price: HK$65.45 Upside: 18.8%

6/19 12/19 6/20E 12/20E

1476.TW 12m Price Target: NT$260 Price: NT$300 Downside: 13.3%

Goldman Sachs Asia Paciﬁc Textile, Apparel & Footwear

Important reports on OEMs’ demand outlook

Goldman Sachs Asia Paciﬁc Textile, Apparel & Footwear

Exhibit 9: Comparison of OEM companies

c.35% of the fabric

OEM/ODM: 59% Footwear OEM:

Bras and intimate

Source: Company data

Goldman Sachs Asia Paciﬁc Textile, Apparel & Footwear

Company-speciﬁc regulatory disclosures