Investment Opportunities For Textile And Apparel Retailers Are Coming.

Investment suggestion

Industry strategy: textile and garment retail sector valuation advantage is gradually highlighted (seven wolf 11 years dynamic price earnings ratio of about 24 times, Weixing about 19 times, Luo Lai, Fu Anna and Meng Jie three home textile enterprises 30 times), and the decline in cotton prices will eliminate the market for brand enterprises gross profit margin and consumer purchase intention decline concerns, we think the above market and basic factors will promote the 2 quarter of textile and apparel retail market quotations.

Recommended portfolio: we continue to recommend high-quality textile and apparel retail businesses:

Industry perspective

Cotton became the most critical factor affecting the industry in the first half of the year: textile raw material prices basically fluctuated with cotton prices; production and export enterprises restricted demand because of high cotton prices; in the future, if cotton prices were cut down, the gross profit margins of enterprises would also be reduced; domestic textile and garment retail enterprises could affect gross margins because of the increase in cotton prices over 9-11 months in two months in 2010, and increasing the selling price for the pfer of cost pressures could affect consumers' purchase intention.

In 3-6 months, cotton prices will have a clear future direction: the 3-4 month will enter the traditional peak season, the supply and demand situation will be clear; in May, the global cotton planting area will be determined, and the future supply will be clear; before June, China and the United States may tighten their money.

We believe that the downward probability of cotton price is slightly larger than the upward probability: capital, market supply and demand and policy are the three most important factors that affect cotton prices. Among them, capital is the key factor to drive up the price of cotton, and the improvement of supply and demand, the difficulty in accepting high priced products by consumers in Europe and America, and the continuous suppression of cotton prices by state policies are the key factors to suppress cotton prices.

Considering that cotton is the leader of this wave of global agricultural futures, we believe that the downward probability is slightly larger.

If cotton prices fall, textile raw materials, exports and manufacturing enterprises should wait and see, and textile and garment retailers will welcome investment opportunities; if they rise, the opposite is true, but excessive cotton prices will have a serious negative impact on the medium and long term real economy.

We still maintain the expected growth in industry efficiency: the export growth rate is between 10-15% and domestic revenue growth is more than 20%.

Risk warning

Cotton prices continue to rise. Although textile raw materials and manufacturing enterprises have trading opportunities in the short term, they will seriously damage industries and enterprises in the medium and long term.

The market does not know enough about the textile and garment retail sector, and the habit of taking similar investment products from the top down to the research and investment may lead to a flat whole plate.

But even so, there is a limited space for our preferred stocks to fall.