We believe concerns over Nameson's （NS） growth outlook due to aweak US market are overdone, as strong order growth from Uniqloand new client wins have more than offset such drop in 1H17.
　　As of today, NS's order outlook for 2H17E from Uniqlo remainsstrong, led by market share gains. Although the US market faredbetter HoH, but YoY still points towards a decline.
　　Besides, we expect GPM expansion of 0.4/0.8ppt YoY for FY17/18E,benefiting from RMB depreciation and cost synergies expected fromits Vietnam plant. As of today, net D/E ratio is at a low single-digit,allowing debt headroom for potential M&As. We reiterate our BUYrating with the PT revised up to HKD2.0 （prev. HKD1.70）， onearnings upgrade and rolling forward our PER basis to FY18E.
　　Strong order growth from Uniqlo. Uniqlo accounted for 58% of NS' totalsales in FY16, as compared with its two other major clients, TommyHilfiger and Ann Taylor, which together accounted for 29%. In 1H17, thehigh double-digit percentage YoY sales order growth from Uniqlo hasmore than offset the double-digit percentage decline from its US clients.
　　Moreover, the new client win with Gap Inc （GPS US） should help driveorder growth as NS expects to receive c.1mn units of order （c.USD10mn）from Gap for FY17E. Thus, we are confident that NS will be able toachieve a 9% YoY revenue growth in FY17E.
　　Progress of Vietnam （VN） Phase II production plant expansion remainsintact. Construction and equipment installation for VN Phase II isexpected to be completed by the end of 2016, with officialcommencement of production in 2017. VN Phase I and II combined willadd 17mn units of production capacity p.a., and thus on top of NS'sexisting production facilities in Huizhou, the PRC of 29.9mn units p.a.
　　given the order commitment from Uniqlo, it will take up c.50% of thenew capacity in VN. Besides, growing contributions from new clients, i.e.
　　Gap and Adastria Group （2865 JP） are expected to be able to fill suchnew capacity. Further down the road, given the signing of EU-VietnamFTA in Jan 2016, though finalised but not yet implemented, NS isexpected to explore European customers.
　　Valuation. We adjusted our net profit estimates for FY17/18/19E by-1.0%/+2.2%/+7.2% respectively, after cutting our ASP assumptionslightly for FY17E and adjusting upwards our GPM forecast for FY18/19Egiven the cost synergies from VN. We also roll forward our PER basis toFY18E, hence, our PT is adjusted upwards by 17.6% to HKD2.0 （prev.
　　HKD1.70） based on 9.8x PER, still keeping a 10% discount to the averageof its mid-stream peers. We reiterate our BUY rating, as medium-termgrowth is intact. NS currently trades at 7.4x PER for FY18E, undervaluedcompared to the average of 10.9x PER for the mid-stream plays.