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TCM [U-PF -11.6%] - Yarn price recovery cannot offset plunge in apparel orders - Update

We downgrade TCM to an UNDERPERFORM rating. Low export sales growth and a potential 6.5% ASP cut this year will weigh on TCM’s apparel business next year, while we do not expect the 8 ppt improvement in its yarn GPM to last long. The negative outlook for U.S. TPP ratification is hurting sentiment toward textile stocks. Even at a 9.2x FY16 P/E, the shares may be overvalued.