Textile And Clothing: The Time For Ambush Is Coming.

Yesterday, the textile and garment sector was strong against the market, and the Sino Japanese group, keno technology, and China Textile share closed up.

In fact, since last week, the performance of textile and garment sector has risen against the market.

Since the second half of last year, the textile and garment retail sector has been adjusted until last week.

The adjustment is not because the market is worried about the performance, but mainly the plate rotation, and the market focus turns to cyclical stocks. In addition, the high cotton price causes the market to worry about the decline of the gross profit margin of the enterprises, and the worry that the consumers' purchase intention may drop after the price rises.

We believe that the "recovery of the bell must be tied to the bell". The recovery of the textile and garment sector in the future will still depend on the pformation of market hot spots and the reduction of raw materials.

We believe that the cotton price in the two quarter will determine the future direction, and the downward probability is slightly larger than the upward probability.

The export growth rate of textiles and garments that has just been announced in February has obviously decreased, and the probability of future cotton price decline has also been raised to a certain extent. In addition, coupled with the expected or expected performance of the three and April orders, textile and garment retail is expected to become a hot spot again in the first half of the year.

For export manufacturing enterprises, according to our investigation,

Investment opportunity analysis

We continue to look good at textile and clothing.

For future cotton prices, we believe that 3~6 months may determine the direction of future cotton prices, and the downward probability is slightly larger than the upward probability.

There are three key factors:

1, the supply and demand side indicated downward: in the traditional peak season of 3~4 months, the market will examine the supply and demand between cotton production in 2010 and demand in 2011.

We believe that in the context of the smooth recovery of European and American economies and the bumper harvest of major cotton producing countries such as the United States, the cotton market is gradually developing in a direction of oversupply. 2, the state has constantly pressed cotton prices through market or administrative means; 3, capital instructions have been upwards: global liquidity easing is the core factor to drive cotton prices up.

If liquidity continues to spread in 2011, cotton prices disregard basic supply and demand, and the possibility of sustained rise is greater.

To sum up, if the funds are not flooded this year, the possibility of falling cotton prices is greater than the increase.

Considering that the price of raw materials has been loosened in the current peak season, the export growth rate has dropped significantly in February, and foreign and domestic enterprises have been deadlocked because of high cotton prices. The determination of cotton price direction is ahead of schedule.

We have always predicted the direction in the two quarter. At present, we think 3~6 month will decide the direction of cotton price.

If cotton prices are reduced in the future, price fluctuations will not be conducive to the production enterprises in the short run, and the gross profit margins will be reduced. But the normal price will be conducive to the development of textile enterprises in the medium and long term. The price of polyester and spandex and cost related viscose with the price demonstration effect of cotton will probably drop.

If cotton prices are up: polyester, spandex and viscose will rise in price, and all related stocks will have opportunities to intervene. We believe that the order of market performance is polyester, spandex and viscose in turn. Because of the market psychology of buying and selling, the large and medium-sized enterprises will benefit from industry integration and sale better in the short run. The traditional productive enterprises such as Lu Tai and Huafu color spinning have the opportunity to intervene. The medium and long term will have a serious negative impact on the textile enterprises, and the adjustment time of the production enterprises may need to be calculated in the year.

For export oriented manufacturing enterprises, we suggest that the timing should be a low gross margin. Therefore, we should pay more attention to the fluctuation of gross profit margin rather than income.

The gross profit margin of export enterprises is influenced by factors such as cost, export policy, exchange rate and so on.

As many enterprises in 2010 reserves a lot of low price raw materials, the gross profit margin was the highest in the three quarter of last year when raw material prices were high. Since the three quarter of last year, as labor costs continue to rise and raw material prices have dropped, we expect gross margins to fall. Unless the cotton prices continue to soar in the two quarter, it is not the time to intervene in manufacturing enterprises.

We still recommend focusing on Weixing shares, seven wolves, Luo Lai home textiles, fuanna and Meng Jie home textiles and other stocks.

In addition, when the market enters the intensive disclosure period of annual reports, we suggest that we should pay attention to those who have high turnover in annual reports.

Short term pressure on export companies due to Japanese earthquake {page_break}

We believe that in the textile and garment enterprises, Japan's relatively high income companies will suffer negative pressure in the short term, but the medium and long term demand will recover. In the future, it may be stimulated by post disaster reconstruction to stimulate consumption.

The reasons are as follows.

In terms of export manufacturing, China's textile and apparel exports to Japan amounted to US $21 billion 258 million in 2010, accounting for 10.7% of the total export volume of the industry.

Japanese textile and apparel consumption accounts for 3%~5% of the world, and short-term fluctuations will not have a significant impact on the demand side of the whole industry.

The order received (the next 2~3 months shipped) is not affected.

Shortly after the earthquake, companies had not yet received orders from Japanese customers to adjust orders.

The export orders for textile and garment industry are usually determined in advance of 2~3 months. The credibility of Japanese customers is relatively high, and the possibility of cancelling the order is smaller.

However, some factories in China will not take the initiative to share the pressure and negotiate with Japanese customers.

Recently, Japan's energy supply is tight, and some retail stores are closed down. The consumption desire of the people in the disaster area may be reduced, and local clothing retailing will be negatively affected.

Demand for orders is likely to be weak in the coming months.

Clothes are necessities of life. When the Japanese people return to normal life, clothing consumption demand will resume, and may be stimulated further by post disaster reconstruction. Therefore, in the medium to long term, the negative impact is small.

The upstream manufacturing industry has a relatively high A export share to Japan: Jialin Jie (Japan: 28.54%), Dayang creation (Asia except China: 25.21%), Hua Si stock (East Asia: 19.73%), Shenda shares (Japan and Korea: 15.65%), Xinhua Jin (Japan: 13.24%), Lu Tai A (Japan and Korea: 10.35%).

In terms of brand clothing, China's local clothing brands are rarely sold in Japan, and production links are relatively low, so they are almost unaffected.