Operates in the highly competitive and fragmented textile industry. Limited product range and pricing power. Volatile earnings due to fluctuations in cotton prices. Well-established niche market position and cost leadership. High capital expenditure. Moderate leverage. Good access to capital markets. The stable outlook reflects our expectation that Texhong Textile Group Ltd. will improve its leverage over the next 12 months after the completion of its Vietnam expansion. We also anticipate that profitability will be flat, after deteriorating this year because of lower prices for domestic cotton and yarn and compressed margins in Vietnam. Despite that, we believe Texhong can maintain a ratio of debt to EBITDA below 3.5x over the next 12 months, which is well below our downgrade trigger.
