J.P. Morgan: Earnings visibility improves for Taiwan apparel manufacturers, while footwear recovery diverges

Why shouldn’t investors expect a synchronized rebound after the broad sell-off?

As of 3 November 2026, shares of Taiwanese apparel and footwear contract manufacturers had fallen by more than 30% on average this year, with valuations near a decade low. JPMorgan believes companies’ earnings outlooks have diverged significantly.
Brand growth only determines the potential pool of orders. Suppliers must also win specific projects, prepare the right capacity and protect margins through tariffs, new-factory ramp-ups and product-mix changes. Apparel production lines can generally switch customers and styles more easily, while footwear lines depend more on specific models and processes, making profits more vulnerable to underutilization.
As of the report, market consensus estimates for 2026 net profit had been lowered by 6% for Makalot and raised by 2% for Eclat during the year; estimates for Lai Yih and Feng Tay had been cut by 32% and 35%, respectively.

JPMorgan’s top pick is Makalot: revenue in the first nine months of 2026 was flat year on year, while gross margin rose 0.8 percentage points to 25.1%. The company prioritizes profitable orders and says it has no longer borne customers’ tariff costs since the second quarter of 2026.
The bank expects Makalot’s revenue to grow 5% in 2027 and its dividend yield to be about 7%–8%; however, its payout is already close to 100% of earnings per share, so the dividend level depends on earnings remaining stable.
Eclat is driving growth through fabric research and development, vertical integration and new customers. Its gross margin was 31.1% in the first half of 2026, up about 3 percentage points year on year; it added three customers that year, one of which began receiving shipments in the third quarter.
Eclat remains affected by weak demand from Nike and Lululemon. Its third-phase garment factory in Indonesia is scheduled to begin adding capacity in the fourth quarter of 2027. Whether new customer orders can offset weakness among major customers, as well as ramp-up costs and working-capital needs at the new factory, will affect the quality of growth.

Lai Yih benefits from relatively healthy demand from adidas and Hoka. Based on 2025 revenue, they accounted for about 60% and 30%, respectively. Weakness in the Converse business remains a drag, but its revenue share is expected to fall from about 24% in 2023 to about 8% in 2026.
JPMorgan expects Lai Yih’s revenue and net profit to grow 6% and 19%, respectively, in 2027, after falling 5% and 16% in 2026. New Indonesian capacity for adidas and Hoka provides room to take on orders, but the pace of recovery depends on order allocation and capacity utilization.
Feng Tay’s Nike business accounts for more than eighty percent of its revenue, and its products are concentrated in weaker categories such as Sportswear and Jordan. Revenue fell 3.7% year on year in the first half of 2026, while operating profit fell 47%; idle capacity magnified the impact of the revenue decline.
The bank expects Feng Tay’s revenue and net profit to be broadly flat in 2027, with a more pronounced earnings recovery not arriving until 2028. Although Salomon orders are growing, they account for less than 10% of revenue and are unlikely to offset pressure on the Nike business.

The bank’s order of preference is Makalot, Eclat, Lai Yih and Feng Tay. It rates the first three overweight and Feng Tay underweight. Apparel makers offer greater visibility on profits and cash returns, while Lai Yih is a recovery opportunity conditional on its capacity ramp-up.
Based on JPMorgan’s forecasts, Makalot, Eclat and Lai Yih trade at about 11–13 times 2027 earnings. Feng Tay looks cheap on market consensus estimates, but on the bank’s lower earnings forecast its 2027 price-to-earnings ratio is about 20 times, close to its historical level.