Gildan Activewear Update

GIL : NYSE : US$52.51
Target: US$60.00

Consumer & Retail — Consumer  Products
Investment recommendation
We are reiterating our BUY rating and increasing our target price to
US$60.00 (from US$57.00) following better than expected Q1/F14
earnings results and reiteration of the company’s medium-term growth
Investment highlights
 Gildan reported Q1/F14 earnings results on Wednesday after the
market close. Sales increased 7% YoY to $451 million. EPS of $0.35,
after adjusting for one-time restructuring and acquisition-related
costs, was slightly above consensus of $0.34, and within Gildan’s
prior guidance range of $0.33-0.35. Gildan reconfirmed its F2014
guidance for sales of $2.35 billion, with $1.5 billion from the
company’s Printwear division and $825 million from the Branded
division, along with its EPS guidance range of $3.00-3.10.
 In November, Gildan announced intentions to begin construction on
a new manufacturing facility by Q3/F14, to support growth at its
Branded products division. The company stated it expects to have
selected a site and completed all related land purchases by the end
of Q2/F14. We look forward to the release of additional details and
believe that the facility’s capacity will be 20-30 million dozens,
which we estimate would add roughly $0.60-0.90 to EPS.
Our US$60.00 target price represents 19.2x our F2014E EPS estimate of
$3.13, or 17.5x our F2015 EPS estimate of $3.42. We believe Gildan’s
balance sheet positions the company to capitalize on accretive
acquisition opportunities, while capacity additions, healthy product
demand and cost cutting initiatives support healthy organic growth.



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