Textile And Garment Industry: Export Rebounded &Nbsp; Recovery Is On The Way.

On the whole, the US wholesalers and retailers are in the out of stock stage. We expect that textile manufacturers with high export dependence will start to recover after entering the two quarter.

After a quarter of the valuation of the market, the textile manufacturing sector will enter the stage of performance driven.

Review on market performance and influencing factors of textile and garment sector

Since the beginning of the year, the textile and garment sector has increased by 10.86%, of which the textile sector has increased by 15.04%, and the clothing sector has increased by 7.96%. In the same period, A shares and Shanghai and Shenzhen 300 rose by 9.07% and 7.22% respectively.

Textile manufacturing sector: Valuation repair

The relative benefits of textile plates come from two aspects: speculation in theme stocks and valuation repair in leading textile companies.

We think that the return on investment of individual stocks can be divided into basic income and emotional fluctuation income: basic income = corporate earnings growth + dividends.

The basic income depends on the fundamental changes of listed companies, such as new production capacity, order growth, production efficiency and other factors.

The volatility of sentiment = the change of valuation, the A share market generally selects the valuation (this is the comprehensive embodiment of the results of emotional change) to characterize this change.

In general, the return on equity investment = Delta EPS+ bonus + delta PE.

The fundamentals of textile manufacturing industry have not improved significantly, but they are expected to improve.

Since the fourth quarter, the monthly export growth of textile and clothing has been narrowing year by year. From the perspective of the representative leading companies, the growth rate of the year-on-year is also declining. The market has been expecting the industry export growth to drop to 10% - 15% in 2012. At the end of 2011, the market unanimously looked at the export.

Brand clothing: abnormal weather, price increase and other factors affect terminal consumption.

Warm winter, price increase and other factors affect terminal consumption, inventory pressure to suppress valuation significantly improved.

Starting in September 2011, the China Business Information Center showed that the number of clothing sales figures of 100 major retail enterprises narrowed year-on-year, while sales in some months showed negative growth.

The latest figures released in February 2012 show that the retail sales figures in February declined by 8.55%.

From 1 to February, the sales volume of clothing increased by 6.10% year-on-year, 22.16% slower than the same period last year, a record low since 2008. The total retail sales of all kinds of clothing decreased by 4.23% compared with the same period last year, but there are structural differences. Men's suits, leather clothing, women's wear, jackets and so on can still maintain a single digit growth, while children's wear, jeans, trousers and winter clothes have a significant decline.

The factors that affect the decline of retail sales of spring clothing include: the high price of clothing, abnormal weather, early spring festival and so on.

Affected by this, part of the brand clothing listed companies in the fourth quarter of 2011, the growth rate of single quarter has slowed down.

Textile manufacturing: exports are expected to rebound in the two quarter

Textile manufacturing performance elasticity comes mainly from external demand.

Textile manufacturing sub industry dependence on exports is about 30%.

Because domestic demand is relatively stable, we believe that the demand elasticity of textile manufacturing is mainly from the external demand.

The proportion of the four largest trading partners is shrinking, but it still occupies a major proportion.

In 2011, the European Union, the United States, Japan and Hongkong accounted for more than 60%, while the proportion of emerging market economies increased, but the proportion of individual regions was still small.

The top 20 trading partners of the Chinese textile and garment industry include the European Union, the United States, Japan, Hongkong, Vietnam, South Korea, Russia, Arabia, Australia, Canada, India, Brazil, Indonesia, Kazakhstan, Chile, Saudi Arabia, South Africa, Malaysia, Turkey and Philippines, accounting for about 93.85% of the total.

When we predict the growth rate of China's textile and clothing exports, we usually lock in the trade giants such as the EU, Japan and the United States, but we think that the structural changes in the export area are worth tracking.

EU: China's absolute import of clothing and textiles from various regions

The United States: the top ten importers and partners of clothing and textiles are still dominant in China, but their share declined slightly in 2011, from 41.2% in 2010 to 40.1% in 2011.

ASEAN rose from 17.5% in 2010 to 18.2%. Among ASEAN countries, Vietnam's share increased from 6.7% to 7.1%, Indonesia increased from 5% to 5.2%, and Bangladesh and India's market share increased slightly.

Japan: among the top importing and importing partners of garments and accessories, China accounts for 82.2% of the total.

Vietnam followed 4.5% share (2010 data).

Signs of revival of external demand

From the perspective of the revival of external demand, the US PMI has picked up in December 2011.

Empirical data show that PMI imports from the US are highly correlated with China's export situation and generally lead 3 to 4 months.

From the US apparel consumption inventory situation, inventory has been launched for some time.

From the data point of view, the Treasury sales ratio of wholesale and retail clothing in the US shows that the wholesale sales ratio has dropped from the high level of 2.12 in July 2011, and the retail sales decline slowly from 2.44 in October 2011.

Overall, the US wholesale and retail stores are in the out of stock stage. We expect that the replenishment of stocks will start in the two quarter.

The textile and clothing consumption figures in the EU27 region showed a year-on-year trend of bottoming up.

We expect that textile manufacturers with high export dependence will start to recover after entering the two quarter.

We maintain the judgement that exports will be bottomed out in the first quarter.

Brand clothing: the high-end brand has stronger ability to increase volume and price.

Men's wear and women's wear grew strongly.

In the context of a slight downward shift in consumption growth, we believe that companies with brand premium capability are expected to go through the cycle and continue to raise prices on the premise of volume growth.

The growth rate of sales of major clothing products in 200 key large department stores in the country shows that the growth rate of women's wear and men's suits is higher than that of clothing in most years, and the growth rate of men's suits since 2008 has been higher than that of the industry since the financial crisis. This shows that the recovery rate of this sub industry crisis is in the lead in the industry, and the women's wear is also showing strong growth. Children's clothing is closely followed.

Medium and high end brands have stronger ability to increase volume and price.

It is up to consumers' sensitivity to the price of clothing that they can continue to raise their prices in the case of volume increase.

We believe that the positioning of high-end clothing products, consumers are less sensitive to price, high-end brand volume and price rising ability.

Compared with texture, price and so on, consumers of high-end brands are more concerned about the cultural connotation, identity status and after-sales service of the brand.

And at the present stage of China, with the increase of income level, consumers' spending on clothing will increase, especially upgrading to the consumption of medium and high grade brands.

McKinsey micro survey data show that over the past year, 74% of consumers have consumer escalation behavior.

Domestic high-end high-end men's clothing brands include: Chuang Ji, French school bird, and so on. These brands have relatively high production prices, positioning in the high-end market, priced at between 2000 and 5000 yuan.

High-end positioning, including the domestic yuan.

High-end positioning, including the domestic yuan.

High-end positioning, including the domestic yuan.

High-end positioning, including the domestic yuan.

The high-end ones include domestic Kaiser shares, genesis card road, and HugoBossHugoBoss, DunhillDunhill, ArmaniZegna, Cerruti1881 and so on.

In the A share market, the positioning of high-end brand clothing companies include: Nu Di Lu, Kaiser shares in men's clothing, the creation of Da Yang (domestic sales brand), the wedding bird, and the stock in the dress.

Consumer research shows that since 2010, the consumption of high-end brands in China (including fashion apparel, leather goods, handbags, watches and premium jewelry) has grown at an average annual rate of 17.6%, and the market capacity is expected to reach 180 billion yuan by 2015.

Taking luxury consumption as an example, consumption in the mainland of China has accounted for 25% of the global market. It is predicted that in 2012 it will surpass Japan as the world's largest consumer of luxury goods.

The growth of luxury consumption in China is mainly based on new demand, which shows that the Chinese people's consumption ability and concept are still in the stage of rapid upgrading, and the subsequent high growth can be expected.

In addition, from the perspective of national policy, the mode of national economic development is facing pformation, and the pulling effect of consumption on the economy has been unprecedentedly raised.

In early March 2012, the Ministry of Commerce issued the notice on launching consumer promotion activities in 2012. The first national consumer promotion month campaign will be launched in April.

From the distribution of wealthy families in China in the next few years, the two or three line urban consumption has been greatly improved, and the potential of consumption has not been fully excavated.

This is a huge consumer market, and all brands are expected to benefit from the growth of the whole market capacity. Carnddi Road, the group of blue, and the birds of good luck have achieved sales income in 2011: 460 million yuan, 836 million yuan, 2 billion 20 million yuan, and the base is relatively low. At present, the brands are still in the stage of sharing the growth cake of the banking industry.

The cultivation of medium and high end brands usually takes a long time to get consumers' recognition.

We believe that when the reputation of high-end brands reaches a certain critical point, the profit curve will enter an accelerated stage.

In the acceleration stage, the brand channel terminal expansion will be accelerated.

It is expected that high quality brand clothing dealers will continue to grow in autumn and winter.

According to the data of the major garment enterprises' order meeting in 2012, men's clothing enterprises still realized the synchronous growth of prices while the order grew, showing a strong relative advantage (compared with casual wear and home textile companies).

And the ability to raise prices on the weak side is an important manifestation of the brand premium capability.

Meanwhile, the men's clothing industry is in a mature stage. The main listed companies are steady in operation, internal fine management is more in place, and the ability to resist systemic risk is stronger.

Investment suggestion

We expect that textile manufacturers with high export dependence will start to recover after entering the two quarter.

We maintain the judgement that exports will be bottomed out in the first quarter.

After the valuation is restored, the textile manufacturing sector will enter the stage of performance driven.

Brand clothing plate, we recommend the sub industry in turn is men's clothing, high-end women's clothing, optimistic about the company for seven wolves, card Nu Di Road, good news birds, and the stock of rouge; manufacturing sector, recommended Huafu color spinning, Lu Tai A, it is recommended to pay attention to the Silver cashmere industry.