Textile Industry: RMB Appreciation And Bad Industry

Textile industry: can withstand 5% RMB appreciation pressure

Negative correlation between RMB appreciation and industry efficiency

Because China's textile and garment enterprises are mainly small and medium-sized enterprises, the sensitivity to RMB appreciation is very strong. When the profit margin is approaching the breakeven point, if the RMB appreciation restarts or even accelerates this year, most enterprises will have no profit.

The Ministry of finance of Xiangcai securities expects that the appreciation of RMB will be between 3%-5% this year, and this increase will be the upper limit for most enterprises.

The Ministry of Commerce and Ministry of industry and information technology are conducting stress tests on labor-intensive industries in order to clarify the impact of changes in the RMB exchange rate on textile, clothing, footwear, toys and other industries.

However, the above sources stressed that we should not be convinced that the renminbi will enter the appreciation channel because of this fact: "this is only a forward-looking plan. Whether the appreciation will be specific is another problem."

"The news has also been confirmed by the relevant business associations.

The person pointed out that this research has been launched in recent months, and has not been informed of clear results for the time being. However, the counterpart chambers of trade unions of several labor-intensive products have roughly estimated that the net profit margin of the industry will drop by 1 percentage points every 1 percentage points, and the average net profit of these industries is only 3%-5%.

Increase in exports for 3 consecutive months

In February 2010, the total export volume of textiles and clothing was 12 billion 638 million US dollars, which has been increasing for the three consecutive months, up 89.34%.

In terms of classification, textile exports rose by 78.19%, and clothing exports rose by 96.29% over the same period.

In the 1-2 months, the export volume of textiles and clothing increased by 39.42% and 23.71% respectively.

Under the environment of demand in Europe and America, production orders of domestic export enterprises are gradually increasing.

At present, although there are second risks in the European and American economies, the employment rate index has stabilized, and there are signs of improvement.

With the improvement of employment rate, consumer demand will gradually pick up, especially after more than a year of clothing consumption atrophy, clothing demand will show a greater degree of rigid demand pull.

Therefore, the volume of orders for domestic textile and garment export enterprises will not decrease in the same period.

With the increase of raw material prices in the second half of 09 years, raw material inventory of enterprises is basically depleted. Higher raw material costs will prompt manufacturers to further increase their prices and pfer raw material cost pressures.

In the future, the order price of domestic textile and garment exports will be further improved.

In the case of volume and price rise, the domestic textile and clothing export volume will continue to grow. It is not ruled out that if the economic recovery in Europe and the United States exceeds expectations, the growth of textile and clothing exports throughout the year will likely exceed 10% of the market expectation.

The export amount will continue to rise, and the price of textile raw materials will rise. The increase in labor costs will erode the profit of export enterprises, increase the contract price of export orders, and raise the price of export products, so that the export amount of domestic textile and clothing will recover quickly.

In the future, with the further improvement of the global economy, the unemployment rate data in Europe and the United States will decline, employment will improve, and consumer psychological barriers will gradually be eliminated. The global textile and clothing consumption is rising, especially the demand for medium and high-end clothing, and the export of domestic textile and clothing will gradually revive.

From the above factors, domestic textile and clothing export prices will rise in the future.

Whether driven by cost or global economic recovery, demand pull has provided conditions for domestic textile and clothing export prices to rise.

The rising price of textile and garment export products in the future will lead to a rebound in the export volume of domestic textile and clothing.

Recovery of global textile industry

Under normal circumstances, the rise in global clothing consumption demand will drive the growth of textile demand.

As China has the most complete textile industry chain, the growth rate of domestic textile exports is greater than that of clothing exports in the case of global apparel demand growth.

After the financial crisis, the rapid decline of demand for high-end clothing caused the decline of textile growth rate more than that of clothing.

At present, the growth rate of textile exports is faster than the growth rate of clothing. This situation has lasted for 5 months, and in 2010, textile exports amounted to US $10 billion 159 million, more than 08 years of the same period (08 years in the same period of 9 billion 463 million U.S. dollars). After deducting the factors such as product prices, textile exports have recovered to 08 years.

This shows that as global demand, especially in Europe and America, has begun to improve, the global textile industry starts to pick up again, and the global textile industry is beginning to pick up.

Industry warming concerns undervalued companies

Judging from the trend of the 1-2 months of this year, the performance of the textile and clothing sector is significantly ahead of the market (leading to close to 14 percentage points), mainly due to the continuous emergence of favorable factors in the industry and less impact on macroeconomic policy regulation.

In the continuous rebound of the industry boom, the spinning and weaving Board continues to rise in kinetic energy.

However, considering that the valuation pressure has been relatively large, Xiangcai securities still has a more cautious attitude towards the whole year's spinning and clothing index exceeding the big market, so we continue to maintain the "neutral" investment rating of the industry.

Short term recommendations are concerned about the trading opportunities in the industry and annual reports.

CIC said that because of the rigid international demand for domestic clothing exports, the future situation will not continue to deteriorate, only to the good.

According to the characteristics of the current international market demand (rigid demand still needs "made in China"), the demand of the future international market will gradually recover with the recovery of the economy.

We should focus on the leading companies with strong bargaining power, such as Lu Tai A, Shandong Ruyi, Jiangsu sunshine and so on.

Star stocks in textile industry

Jiangsu sunshine: the perfect storm is on the verge of fire.

Jiangsu sunshine is the world's largest worsted spinning enterprise, or the key high-tech enterprise of the national Torch Program. It has 120 thousand spindles and 600 looms. It is the largest production base of high grade and high quality thin fabric in China.

The "sunshine card" worsted fabric has the largest share in the domestic market, and the leading position of the industry is outstanding.

The company invested 234 million yuan to set up Ningxia sunshine silicon industry company (65%). The company plans to produce 4000 tons of silicon crystal per year, and its first annual output of 1500 tons of silicon crystal project has been successfully launched, and it was put into operation in March 2009.

The company has signed a long-term supply agreement with the downstream silicon enterprise hareun photovoltaic. Due to the policy support of the state to increase the photovoltaic industry, the Ningxia sunshine silicon industry company invested by the company in 2009 will be fully put into operation, and the business will continue to grow in the future.

China's large fine wool production enterprises, its "sunshine card" worsted fabric domestic market share.

At present, the company has undertaken dozens of national patents, including 863 national projects, national technological innovation projects, national key new products, and national high-tech torch project research projects.

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The impact of the international financial crisis is still continuing. However, judging from the current international market situation, this effect is gradually weakening. It is expected that in 2010, the international economy is expected to gradually get out of the shadow of the financial crisis, and there will be a real rebound. The main business of the company is expected to have a resumption of growth in 2010, but it is still difficult to reach the level of 2007.

It is estimated that earnings per share in 2009 and 2010 are 0.06 yuan and 0.13 yuan respectively, and the dynamic P / E ratios calculated by last year's closing price of 5.47 yuan in October 23rd are 88 times and 41 times respectively. The valuation is high, so as to maintain the company's "neutral" investment rating.

Voyage shares: bottleneck of textile recovery

Printing and dyeing will become the bottleneck of demand recovery in the upstream industry chain of textile industry. At the beginning of 1H09, exports will promote the revival of textile and garment industry, and then drive the growth of textile and apparel upstream industry chain; environmental barriers will lead to the entry threshold of printing and dyeing industry, and there are basically no new printing and dyeing enterprises in the near future. In 2007, the adjustment of printing and dyeing industry has increased the concentration of industries, making the industry a bottleneck for the revival of textile and apparel upstream industry chain, and the overall supply and demand situation of the industry is better.

The company is the largest printing and dyeing enterprise in the country. It has 800 million meters of printing and dyeing capacity, 19 million meters of weaving, 500 million degrees of electricity, 3 million 300 thousand tons of steam and 10 thousand tons of dyestuff. It constitutes a complete printing and dyeing industry chain.

Printing and dyeing business adopts the mode of commissioned processing and processing fees to reduce operational risks.

Adjust the product structure, increase the gross profit margin of printing and dyeing industry, make the supply and demand situation of printing and dyeing industry better, and increase the cost of printing and dyeing.

By raising the product mix and raising processing fees, the gross margin level will be raised.

The increase in printing and dyeing processing fees was the main reason why the gross margin level of the company rose from 16.32% in the two quarter to 19.08% in 4-6%.

Shipping business has become a new growth point. The controlling shareholder has 40 thousand tonnes of freight capacity to meet its own demand of about 1 million tons of coal pportation, and has about 1 million tons of capacity to pport coal in the surrounding areas.

The shipping price was only 30 yuan / ton when the shipment was started in September 2009. At present, the shipping price has risen to about 50-60 yuan / ton, and the freight rate is estimated to be about 60 yuan / ton in 2010.

It is estimated that shipping revenue will exceed 25 million yuan in 2009 and 110 million yuan in 2010.

According to letter securities analysis, 2009-2011 years earnings per share of 0.40, 0.54, and 0.66 yuan, giving the "recommended" rating environmental barriers, making the printing and dyeing industry become the bottleneck of demand recovery for the upstream industry chain of textile and apparel industry. Aviation shares increase the processing fee through printing products, improve the gross profit margin of printing and dyeing business, and promote the steady growth of business performance, and shipping business will become a new profit growth point.

Xiangcai Securities believes that the "buy" rating is maintained, with a target price of 12.42 yuan in 6-12 months and a potential increase of 30%.

The intrinsic value calculated based on DCF valuation is 10.98 yuan.

Based on the earnings growth rate of 23 times earnings and 23% earnings per share in 2010, the internal value of the stock was calculated to be 12.42 yuan.

It is estimated that earnings per share in the 2010-2011 years will be 0.54 and 0.68 yuan respectively, corresponding growth rates of 23% and 26% respectively.

The company is a robust business enterprise with strong defensive nature. If the risk of downside is large, it should be a good hedge species.