Hanoi (VNS/VNA) - The textile and garment industry is forecast to have abright prospect in 2022, but as share prices have increased sharply since 2021,many stocks may not continue to rise significantly.

As a result, analysts say investors should only prioritise enterprises withgood fundamental growth.

At the end of 2021, US President Joe Biden signed a law banning the import ofcotton materials produced in Xinjian, China into the US. US Customs and BorderProtection estimated that about 9 billion USD of cotton products were importedfrom China in 2021.

This can be seen as a great opportunity for Vietnamese cotton yarn companiessuch as Vietnam National Textile and Garment Group (VGT), Damsan Joint StockCompany (ADS), and Phong Phu Corporation (PPH) among others. 

It is similar to what happened in Europe in March 2021, when a series of majorinternational fashion brands such as Nike, H&M, Uniqlo, and Zara announcedthey would stop using cotton materials from Xinjiang.

China's share of textile and yarn exports to Europe fell from 52.4 percent in2020 to 44.7 percent in 2021.
Vietnam became the EU'ssixth-largest non-regional textile supplier in 2021, accounting for 3 percentin value.

According to the European Textile and Apparel Federation (Euratex), the EUtextile industry witnessed a strong recovery after COVID-19. Specifically, thevalue of textile and garment output had increased back to pre-pandemic levelsby the end of November 2021.

Meanwhile, the International Monetary Fund (IMF) and the World Bank (WB)forecast global GDP growth to reach 4.9 percent in 2022, and world textiledemand in 2022 will return to 2019 levels, reaching about 740 billion USD.

The recovery of the world textile and garment industry will also help Vietnam’sexport turnover to complete the plan set out in 2022, at 43 billion USD, anincrease of 4 billion USD compared to the figure of 39 billion USD in 2021.

Large textile companies such as Garment 10 Corporation JSC (M10), Century YarnJSC (STK), Thanh Cong Textile Garment Investment Trading Joint Stock Company(TCM) have all had enough orders until the second quarter of and the thirdquarter of this year.

Despite facing many difficulties in the third quarter due to the tightdistancing policy amid COVID-19, 2021 will be a successful year for textile andgarment enterprises.

According to estimates of VNDirect Securities (VND), total revenue in thefourth quarter of 2021 of listed textile companies increased by 24.1 percentthanks to the recovery of textile companies in the south. After the end of thelockdown, most southern companies were running at 85-90 percent capacity,compared with 50-60 percent capacity in the third quarter.

Thanks to the fourth-quarter results, total revenue in 2021 of listed textilecompanies increased slightly by 7.6 percent while net profit increased by 57.4 percent.Companies recording impressive profit growth in 2021 include DamSan Joint StockCompany (ADS), up 303 percent, Vietnam National Textile & Garment Group(VGT), up 161.4 percent, and Century Synthetic Fiber Corporation (STK), up 93 percent.

Business results in 2021 showed division among businesses in different regions.Northern garment companies such as Song Hong Garment Joint Stock Company (MSH),TNG Investment and Trading Joint Stock Company (TNG) have high-profitgrowths in 2021, both with an increase of more than 90 percent.

The reason was that these enterprises had improved their product portfolio,increasing free on board (FOB) orders.

Garment companies in the south saw lower profit growth because their factoriesonly operated at 50-60 percent of capacity during the time of social distancing.

Among them, Thanh Cong Textile Garment Investment Trading Joint Stock Company(TCM) and Viet Tien Garment Corporation (VGG) were the two listed companiesthat recorded negative profit growth in 2021, down 48 percent and 41 percent,respectively.

According to statistics, the textile and garment stock group has achievedimpressive growth since the beginning of 2021, reaching between 48-291 percent.

Vietnam National Textile & Garment Group (VGT) up 153 percent, Song HongGarment Joint Stock Company (MSH), up 126 percent, Century Synthetic FiberCorporation (STK) up 178 percent, TNG Investment and Trading Joint StockCompany (TNG) up 116 percent, DamSan Joint Stock Company (ADS) up 291 percent.

For this reason, analysts recommend that investors be cautious when investingin textile and garment stocks at present. According to VNDirect Securities Co(VND), although the textile and garment industry is expected to have a brightprospect in 2022, investors need to invest selectively because most of theindustry's shares are no longer cheap. Investors should only prioritiseenterprises with plans of factory capacity expansion in 2022-2025.

DamSan Joint Stock Company (ADS), Thanh Cong Textile Garment Investment TradingJoint Stock Company (TCM), and TNG Investment and Trading Joint Stock Company(TNG) have expanded their business further to the segments of real estate andindustrial park real estate. It is expected that the new business segments willhelp these businesses maintain profit growth in the period 2022-2025./.