Date of Report
Thursday, 03 October 2024
Broker Name
UOB Kay Hian
Management’s Growth Targets
Crystal International has set ambitious targets for 2024, aiming for double-digit percentage sales growth. The company has turned more optimistic about its outlook for 2024-2025, having nearly doubled its labor addition target for 2024. This confidence stems from strong market demand and internal efficiency improvements, which are expected to drive future growth.
Gross Margin Improvement
Crystal’s management is focused on achieving a 20% gross margin in the coming years, supported by continued efforts in automation and production efficiency. These initiatives are expected to enhance profitability and improve the company’s operational capabilities, helping it meet its margin targets over the long term.
Positive Momentum in Sportswear Segment
The restocking momentum in the sportswear segment, a key market for Crystal, is expected to continue into the first half of 2025. The company remains well-positioned to capitalize on long-term share gains from key customers in this segment. Crystal’s ability to meet growing demand while improving efficiency will be central to its ongoing success in the competitive sportswear market.
Profit and Dividend Outlook
Crystal’s net profit is forecasted to grow by 22%, 14%, and 13% in 2024, 2025, and 2026, respectively. The company also plans to increase its dividend payout ratio to 60% for 2024-2026, a significant rise from 40% in 2023. This reflects Crystal’s strong financial performance and commitment to returning value to shareholders.
Valuation and Target Price
UOB Kay Hian maintains a “BUY” rating for Crystal, with a target price of HK$4.92, based on 9.2x 2024 forecast price-to-earnings (PE) ratio. Crystal is currently trading at an attractive valuation of 6.8x 2024 forecast PE, with an estimated dividend yield of 9.0% for 2024 and 10.1% for 2025, making it a compelling investment option for those seeking growth and income.
Catalysts for Share Price Growth
Several key events could drive Crystal’s share price higher, including the potential for Fast Retailing to raise its revenue guidance in October 2024. Additionally, stronger order book growth for 2024-2025 could further boost the company’s performance, providing upside for its share price.
Timeline for Growth
Investors should expect Crystal’s growth momentum to continue through the second half of 2024, with key updates on its financial performance and potential market developments expected in the coming months. The company’s ability to deliver on its targets will be crucial to sustaining its positive outlook.
Investment Outlook
With its focus on automation, efficiency gains, and expanding market share in key segments like sportswear, Crystal is well-positioned for strong financial performance in the coming years. The company’s growth prospects, attractive valuation, and commitment to higher dividend payouts make it a compelling investment opportunity for long-term investors.
