Textile Industry:Toray-Pacific Textiles deal highlights the urge for consolidation

Evet: Toray to buy 28.03% stake i Pacific Textiles to become its largestshareholder

    Pacific Textiles aouced the deal at the Hog Kog Exchage o 2017Ju 30. Toray plas to buy 405m shares i Pacific Textiles at HKD10 (11%higher tha Pacific Textiles’ closig of HKD9.01 as of 2017 Ju 30).

    The urge for itegratio

    Toray is reowed for its fuctioal fiber (HEATTECH, sweat wickig / heatdissipatig fuctioal fiber…etc.). However, based o our uderstadig,Toray does ot ow i-house fabric capacity. O the other had, PacificTextiles does ot have fiber capacity, or garmet productio.

    We believe the deal is drive by the urge for itegratio. We witessed aacceleratig supplychai cosolidatio by major apparel brads sice 2017,icludig Uiqlo (oe of Pacific Textiles’ major cliets). We estimate thatShezhou has bee takig more Uiqlo orders from other textilecompaies YTD, thaks to Shezhou’s strog itegratio.

    Eclat, Far Easter, Sabria…etc. all executig itegratio

    Eclat aouced (durig its 1Q17 aalyst meetig) that it will co-work withleadig third-party fiber maufacturers to develop exclusive fuctioal yar.

    We believe Eclat’s ivestmets i jacquard techology eable it with morefabric iovatio, icludig the adoptio of extremely sophisticatedprofiled fiber. Thaks to a sigificat oversupply of fiber & yar capacityTaiwa, Eclat holds strog bargaiig power i the developmet admaufacturig of its exclusive fiber, i our view.

    Far Easter holds i-house fiber capacity ad has bee tryig to attractew orders usig its exclusive fiber collectios.

    Sabria (private), oe of the most sophisticated sports garmet makersthe world, holds a strategic alliace with Eclat, i our view. The alliaceaims to (1) provide Sabria with more fabric kowledge while securigfabric supply from Eclat, i retur, (2) Eclat ca upgrade its garmetmaufacturig by tappig ito the most advaced weldig productio.