Makalot — Investor Presentation 2021

Nov 29, 2021

Makalot Industrial Co., Ltd.

November , 2021

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Makalot Industrial Co., Ltd.

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Agenda

Table of Contents

1. Company Overview

2. Financial Highlight

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Makalot Industrial Co., Ltd.

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A Glance at Makalot

Company Overview

A well known integrated coordinator of apparel supply chain in Asia

Makalot’s Strength

2021 Main Strategies

 Strong management : Creating best formula to stable margin through international production bases across 5 +1 countries with diversified production lines.

 Value added service : Providing our customers with one-stop shopping experience and high value add services in design, material sourcing and speed to market.

• Vertical integration : An addition of a fabric mill in Vietnam though JV in 2013 enables Makalot to upgrade its speed to market and lower production cost.

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Innovation ESG
Speed Diversity
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Com an outline p y

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Company Overview
Product lineProduct line Customers Production baseProduction base
• •
• Brands Vietnam
Sportswear
•
Ready to Wear
•
• Indonesia
Sleepwear
•
Activewear
• •
Outdoor Cambodia
•
• Mass Channels
Uniform
•
China
•
•
Philippines
Department Stores
•
Africa
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Company Overview

2021 & Be ond y

 Supply chains are moving out of China

 Production moving out of China due to wage growth and worker shortage.

 Avoid the risk of US-China trade war, buyer is looking for non China production base

 Big vendors become bigger

• With buyer’s vendor consolidation plan, big supplier would gain more market shares.

 Stronger co-operations benefitting vendors with stable finances and diversified production bases.

 Barrier to entry due to stronger demand for large scale productions and innovation capabilities.

 Reduce supply chain lead-time

 In order to improve inventory management, customers require vendors to shorten lead-time.

 Vendors who are able to cut their lead-time will be the winner in the long run.

 Implement ESG rule

 In order to control risk, customers ask vendors follow the high specification ESG rule.

• Clients will increase orders to the vendors who performed well in ESG .

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Makalot Industrial Co., Ltd.

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Com etitive Advanta e & Growth Driver p g

Company Overview

 Competitive Advantage : Diversified & Flexible & Integrated

Diversified

Flexible

Integrated

• 6 production countries

• Customers from different segments

• About 8% outsourcing

• Quick replenishments

• Inventory management

• Multiple Products

• Design services

• Material souring

• Diversified product categories

In the next 3 years,

3V (Vendor consolidation + Vertical Integration+ Virtual design )

 3 N

• New markets

• New customers

• New products

 3 V

• Vendor consolidation : Makalot continues to gain market share in recent years.

• Vertical integration : cost and quality control, Makalot can provide buyers with attractive prices.

• Virtual design : the installation of 3 dimension printing technology allows Makalot to reduce lead-time.

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Makalot Industrial Co., Ltd.

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Cor orate Social Res onsibilit p p y

1. The top 5% companies in the Sixth Taiwan Corporate Governance Evaluation in 2020 2. Appointing “Corporate Governance Officer” in 2019

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Company Overview

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Makalot Industrial Co., Ltd.

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O eratin Hi hli ht p g g g

Company Overview

Revenue by Product Line 2020 Revenue by Customer 2020 Revenue by Country 2020

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Top clients revenue proportion diagram

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Makalot Industrial Co., Ltd.

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Global Network/Production Sites

							Company	Overview
Site	Function	2020 Capacity	%	2021E Capacity	%	2020 Min. wages	2021E Min.	Growth
		(dozens)		(dozens)		(US$/Month)	wages
Taipei, Taiwan	Headquarters
Shanghai,China	Office/ SourcingCente
Vietnam	Factory	5,790,000	40%	7,040,000	40%	$159 ~ $206	$159 ~ $206	0%
Indonesia	Factory	4,940,000	34%	6,020,000	34%	$142 ~ $313	$146 ~ $322	3%
Cambodia	Factory	2,880,000	20%	3,250,000	19%	192	193	1%
China	Factory	630,000	4%	760,000	4%	367	378	3%
Philippines	Factory	360,000	2%	430,000	2%	215	215	0%
Total		14,600,000	100%	17,500,000	100%

Capacity Distribution Chart (Country / Production %)

 We can quickly adjust capacities among these sites to capture low-cost advantages.

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Cost Breakdown

Company Overview

Cost of good sold breakdown

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Overheads
10%
Labor
16%
Fabrics
58%
Accessories
16%
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Cost Structure based on ASP

• Material 60%

• Labor 13%

• Overheads 7%

• Gross Margin 20%

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Regional Peers

Company Overview

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Financial Hi hli ht g g

										Financial Highlight	Financial Highlight
											2021
NT$mn	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020	Q1~Q3
Net Sales	15,123	15,867	17,911	20,889	23,359	22,128	22,375	23,930	27,048	24,924	21,234
Sales growth (%)	6.99%	4.92%	12.88%	16.63%	11.82%	-5.27%	1.12%	6.95%	13.03%	-7.85%
COGS	11,966	12,706	14,344	16,362	17,847	17,611	18,050	19,187	21,622	19,353	16,526
Gross profit	3,157	3,155	3,567	4,527	5,512	4,517	4,325	4,742	5,425	5,571	4,708
Operating profit	1,449	1,484	1,624	2,087	2,650	1,949	1,767	1,977	2,490	2,666	2,587
Net profit	**1,112 **	**1,177 **	**1,342 **	**1,705 **	**2,177 **	**1,543 **	**1,297 **	**1,522 **	**1,929 **	**2,079 **	2,005
Net profit growth (%)	21.21%	5.78%	14.08%	27.06%	27.65%	-29.14%	-15.95%	17.39%	26.73%	7.77%
Basic EPS (NT$)	**6.92 **	**7.17 **	**8.02 **	**9.62 **	**10.90 **	**7.39 **	**6.18 **	**7.20 **	**8.66 **	**9.35 **	8.43
Gross margin	20.88%	19.89%	19.92%	21.67%	23.60%	20.42%	19.33%	19.82%	20.06%	22.35%	22.17%
Operating margin	9.58%	9.35%	9.07%	9.99%	11.35%	8.81%	7.90%	8.26%	9.21%	10.70%	12.18%
Net margin	7.35%	7.42%	7.49%	8.16%	9.32%	6.97%	5.79%	6.36%	7.13%	8.34%	9.44%
ROE	27.09%	25.88%	26.83%	25.17%	25.20%	17.29%	15.05%	17.51%	21.34%	21.47%
ROA	16.02%	15.00%	14.69%	15.44%	17.04%	11.56%	10.09%	11.61%	10.71%	9.12%

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Makalot Industrial Co., Ltd.

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ASP/ Shi ment p

Financial Highlight

Shipment (m’dz)

ASP

	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020
Shipment (million dozen)	8.16	9.16	10.51	11.60	12.80	12.10	12.90	13.70	14.50	14.60
Growth	0%	12%	15%	10%	10%	-5%	7%	6%	6%	1%
ASP (US$/dozen)	63.34	59.04	58.11	59.71	57.92	56.50	56.02	56.40	59.78	58.01
Growth	15%	-7%	-2%	3%	-3%	-2%	-1%	1%	6%	-3%

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Financial Highlight

Debt Ratio

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 2020 Net Debt position = NT$ 1,028 million = NT$ 2,367 million cash on hand - NT$ 3,395 million debt

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Ca ital Ex enditure p p

Financial Highlight

million NT$

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• 2017 capex was about US$ 10.69 million (NT$ 325 million)

• 2018 capex was about US$ 13.00 million (NT$ 391 million)

• 2019 capex was about US$ 16.50 million (NT$ 497 million)

• 2020 capex was about US$ 24.13 million (NT$ 712 million)

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FX ain/loss g

Financial Highlight

NT$mn	2009	2010	2011	2012	2013	2014	2015	2016	2017	2018	2019	2020
FXgain/(loss	(45.1)	(49.8)	(26.3)	(62.7)	33.1	42.8	83.9	23.4	(64.2)	39.5	(8.7)	(22.4)
Total sales	13,311	14,135	15,123	15,867	17,911	20,889	23,359	22,128	22,375	23,930	27,048	24,924
% to total sal	-0.34%	-0.35%	-0.17%	-0.40%	0.18%	0.20%	0.36%	0.11%	-0.29%	0.16%	-0.03%	-0.09%

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Hedging strategies

1. Put in place much more conservative FX budget forecasts for the upcoming year.

2. Cash flow hedges to reduce the exposure to variability in certain expected future cash flows. Natural hedge = 80%, and net exposure position= 20%. Using USD/NTD forwards to hedge this 20% net position risk.

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Makalot Industrial Co., Ltd.

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Dividend Policy

Financial Highlight

NT$

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 Mainly cash dividend payout ratio will be maintained between 70% and 90%.

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Makalot’s History

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 Founded in Taipei with woven apparel as the primary business
1990
 Established a production facility in the Philippines and forged an OEM strategic alliance in Taiwan
1994 Ventured into the knitted apparel production industry
Established an IT Department to promote computerized operation in the firm
1997
Developed diversified product strategy
1998 Started global production strategy
2000 Established a production facility in Indonesia
2001 Expanded the Cambodia apparel production
2002 Expanded the apparel production strategic alliance in Vietnam
2003 Established the Design Planning Department to enhance ODM service capability
2004 Turnover exceeded NT$10 billion
2005 Expanded the apparel production strategic alliance in Vietnam
2006 Established the South Vietnam and China production facility
2010 Established Ecolot Textile Co., Ltd
Purchased the headquarters building
2013 Established Demak production factory in Indonesia
Invested in Namtex Co., Ltd., Vietnam
2015 New Green Sportswear Plant in Vietnam
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Q&A

Thank You

Thank You

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Makalot Industrial Co., Ltd.

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