Textile Industry Revenue Growth Slowed, A Shares Investment Habits Overestimate

　 A share investment habits overestimate profit forecasts

Zhang Bin, textile and apparel analyst of state securities company

According to the feedback information from our enterprise survey, the order volume has improved in May, but the domestic sales side is expected to have relatively flat sales data in May. In the next 1~2 years, whether raw materials or domestic exports are exported, the recovery is slow and the inflection point is not obvious. Relatively speaking, because of the recovery of the US, the recovery of export manufacturing enterprises may be slightly earlier than domestic sales. The main reason for the slow recovery is that the US economy recovers, but a large number of orders flow to Southeast Asia and India. The domestic market is depressed by the price increase caused by high cost, and the spinning enterprises, whether manufacturing or domestic enterprises, have increased the degree of oversupply because of the excessive expansion in the early stage. This year for the industry transformation period, raw material enterprises, manufacturing enterprises and retail enterprises are slightly lower and slightly slower than before.

The market is expected to slow down China's economic development in 2012, and at present, statistics and department stores data show that consumption growth has slowed down. The development history of textile and apparel retail brands in the past 20 years is actually a bull market in the past 20 years. Neither the capital market nor industry has faced the complicated situation in the transitional period. The market is worried that leading enterprises can maintain high growth. It is not unfounded. At present, the statistics on domestic textile and apparel consumption growth, the department store data and the terminal retail situation are deviated from the performance growth of listed companies. This divergence is the main factor to suppress the performance of domestic brand enterprises in 2012. The market has already made a choice for such a deviation, that is, to underestimate the value. Textile and clothing Retail business dynamic valuation is mostly 15~20 times, the valuation continues to reduce the space is not big, but the company profit has the downside risk.

Sluggish performance in the first half may affect investor confidence, from investors. A shares Investors do not have the opportunity to experience the process of brand decline and stock price collapse (such as sportswear, fortune global, Chinese trend, etc.), like China, Hongkong and European and American investors, and the domestic market is dominated by investment products. Investors are accustomed to investing in investment products from the top down thinking. They are too optimistic about the opportunities brought by future consumption driven economy to individual enterprises, which will lead to a higher profit forecast for the market.

　 Industry revenue growth slowed sharply compared with last year.

Liu Jinhu, textile and apparel analyst of national offshore securities

Brand clothing industry entered in 2012 Destocking In the first half of the year, enterprises actively carried out terminal inventory and sales promotion. According to a quarterly report in 2012, the inventory pressure of listed companies has been improved to a certain extent. The proportion of inventory / current assets relative to 2011 has decreased significantly in the first quarter, but this is also at the expense of the profitability of enterprises, and the growth of net profit in the first quarter is lower than that of revenue growth. With the improvement of inventory situation, the business indicators of garment enterprises in the second half of this year will be further improved. In terms of revenue, orders will basically lock the annual income of garment enterprises in 2012, and the growth rate of the whole industry will be substantially slower than that in 2011. In the second half of this year, business indicators will be improved, but the progress of recovery will be affected by the macro-economy.

The unfavorable situation of textile manufacturing industry comes from two reasons. On the one hand, the severe export situation has caused the terminal demand of foreign countries to become sluggish. On the other hand, the continuous increase of cotton price spreads at home and abroad has weakened the international competitiveness of China's textile industry. Under the background of the slow recovery of the global economy, the industrial transfer caused by demographic dividend disappearing and cotton price differentials is a long-term unfavorable trend faced by China's textile manufacturing industry. The driving force for the future growth of textile manufacturing industry comes from the structural transformation and upgrading of the industry itself. At present, there is no obvious new impetus for the growth of the industry.

In the context of the fundamental improvement of the brand clothing industry, the adjustment of the industry needs to be observed. Focusing on the growth of performance, the pressure of inventory pressure is small, brand management mature industries and companies, such as nine herd kings and seven wolves, the industry has a larger pre adjustment, and the company's ability to resist risks is better than that of sub sectors. For example, fuanna, the annual performance of home textile industry is expected to be low and high, and the industry will have inflection points in the second half of the year.

Middle and high-end niche industry has anti cyclical nature.

Textile and clothing researcher, Xiangcai securities

Because of the May 1 holiday in April and the May 1 holiday in May in 2012, the growth rate of all commodities declined to normal.

In the same period last year, the industry boom was higher, and the price of garment industry could be absorbed by downstream consumers. This year, raw material prices have dropped and industry inventories are high. The pulling force of price will surely decline this year. At present, consumer confidence is low, consumer desire has declined, sales growth can not be restored to the calendar year level. This year's consumption growth rate has dropped to a big probability event.

After the end of the state purchase and storage in April, the downstream demand remained sluggish and domestic cotton prices continued to fall. The National Bureau of Statistics announced the CPI in May. The national comprehensive CPI was 3%, of which clothing CPI was 3.12%, and began to fall. Mainly due to the inventory pressure in the two quarter of the industry, there has been a large-scale discount sales, so that the price of the ring down. Clothing CPI is running at a high level, and the growth of clothing terminal consumption is weakening. In the case of falling cotton prices, CPI is expected to have a downward trend in the future. The growth rate of the industry is mainly based on volume growth.

At present, the performance and valuation of textile enterprises are at a historical low point, but the turning point of performance needs to wait. It is suggested that we should pay close attention to the company with certain expected difference between the second half performance and the market expectation.

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China is now in the stage of rapid growth of middle and high income groups. In the background of the decline of terminal consumption growth, the high-end consumption has certain anti cyclical nature, especially the niche industry targeting high-end high-end consumer groups, such as outdoor products industry, middle and high-end men's clothing industry and fur clothing industry.

　　 Structural changes in manufacturing are more important than cycles.

Zhao Meiling, textile and apparel analyst of Anxin securities

After two years of rapid growth, the textile and garment industry has entered the boom and downhill sector in 2012. Since the three quarter of 2011, brand retail growth has continued to decline, channel promotion efforts and frequency have continued to increase, and inventory is in progress. The market looks forward to the turning point and expects the improvement of terminal demand, such as the improvement of terminal price rate, the improvement of the order data, the improvement of inventory turnover and the improvement of cash flow. At present, there is no sign of obvious improvement, and the industry adjustment time may be longer than that expected by the market.

At this point in time, the brand retail sub industry's stability is the top priority in the second half of the year. In the second half of the year, the competition pressure is small, the performance growth is determined, and the industries and companies with low inventory pressure are the key investment directions. We should actively look for the industry leaders whose demand is the first to recover.

The structure of manufacturing is more important than cycle. Textile and garment manufacturing industry is also in the decline of economic growth under the background of global economic slowdown, but the structural change is more important. Since 2011, China's share of US imports has declined for the first time. The fundamental reason lies in the gradual loss of labor cost advantage in China. We believe that the loss of orders will become a long-term trend. The future direction of investment in textile and garment manufacturing industry comes from: the sharp rise in cotton prices of major raw materials and the adjustment of earnings from inventory adjustment; and the monopoly of raw material resources, such as silk, wool, fur and so on, and the expansion of capacity to Southeast Asia. At the present time, the above three investment directions have not found suitable investment targets. Therefore, in the second half of the year, we do not recommend textile and garment manufacturing sub sectors.

In the context of slowing economic growth, the textile and garment industry is in a downward trend. But compared with other industries, performance growth and stability still have comparative advantages, and still may be ahead of the big market. The risks to be noted in the second half of the year are the continued deterioration of terminal retail and the continuous spread of cotton spreads at home and abroad.

　 Cost advantage can better grasp incremental preference.

Cheng Yuan, Huatai textile and garment analyst

The industry has experienced "the withering period after the blooming flowers" and is expected to improve in the fourth quarter. The brand clothing industry has experienced sustained and rapid growth in the past few years, and has been significantly reduced by the macroeconomic impact since the fourth quarter of last year. The downturn in consumption will continue in the short term, but the base will suddenly decrease in the four quarter, and inventory will be digested in the first three quarters, so it is estimated that there will be industrial investment opportunities in the four quarter. The change of consumption mode makes C2C attack unstoppable, and the mature brand is far away from the net. At present, the C2C model, which accounts for 80% of the volume of clothing online shopping and has a fast growth, is still unable to see any signs of future growth. Therefore, it is expected that its impact on the clothing brand will continue, and the casual wear industry is the hardest hit area. Business clothing and high-end brands are relatively vulnerable, and there will be a clearer market competition pattern in the future. Although the online mature brand touches net has a strong advantage, it is difficult to solve the problem of coordinating pricing on line and offline. The company with high direct management channel and strong management capability will be more likely to break through this bottleneck in the future.

The change of consumption age structure makes the income of formal dress and business casual clothing, footwear and home textiles great, and fashion and leisure are negatively affected. In the next five years, the number of people entering the age of formal clothing and business casual wear will increase by 38 million, accounting for 7% of the total age of the age group (25-55 years old). In recent years, the number of marriages has soared. Judging from the change of age structure, the number of marriages in the next five years will continue to increase. The number of divorces and the average family size in China is also rapidly approaching the developed countries such as the United States and Japan. It is estimated that the domestic textile industry will have more vigorous demand in the next five years. The main consumption age of fashion casual clothing will decrease in the future.

The change of income distribution will speed up the growth of explicit income in the future, and the growth of hidden income will slow down. Therefore, the growth of middle and low end demand in the future will be faster than that of high-end. However, due to the relatively short supply of high-end brands in China, the high-end market competition in the future will remain in a pattern of strong demand and weak competition. In the medium to long term, the brand with cost advantage will better grasp the consumption preference of the incremental market and have better prospects for development.

To raise the channel efficiency by lowering the rate of increase

Guo Haiyan, textile and garment analyst of CICC

Brand clothing home textiles in the first quarter is a low point. From the total retail sales volume, the clothing sales volume above the limit and the top 100 retail sales data, 4~5 month has improved, the price growth has slowed down, and the volume recovery is not strong enough. In 2011, the selling rate of autumn winter clothing and spring clothes in 2012 was slightly lower than that in previous years. Stock pressure was manifested as a decline in inventory turnover, from 2.9 times in 2008~2010 to 2.5 in 2011 and 2.1 in 2012. The decline in accounts receivable reflected a decline in the rate of return of franchisees, from 20 times in 2008~2010 to 16 in 2011 and 12.8 in 2012 first quarter; and the value of operating cash flow /EBITDA decreased from 74% and 77% in 2008~2009 to 32% in 2011 and -17% in the first quarter. The decline in inventory and receivables turnover and poor operating cash flow suggest that the quality of growth may be general. Textile manufacturing faces double downward pressure on revenue and profit margins in the first quarter. It is expected that the average cost of cotton will decline in the two quarter, and the decline in product prices will be narrowed compared with the first quarter. This will slow down the downward trend in gross profit margins, but the pressure on revenue decline is still there.

A weaker household textile, youth casual wear and textile manufacturing sector may still be unsatisfactory. For example, Semir clothing, Meng Jie home textiles and Lu Tai should pay attention to the risk of annual profit forecast reduction.

The order of the brand clothing sector will be partially locked in the second half of the year. Outdoor growth is still in the lead, men's clothing is growing steadily, the differentiation of home textiles and youth casual wear, and the growth of terminal sales will obviously rebound until the fourth quarter.

Textile manufacturing sector, global cotton is still oversupply, through the promotion of cotton prices to stimulate the possibility of product price increases, the industry inflection point may be delayed, need to continue to improve downstream and overseas demand.

In the long run, the high price of domestic clothing affects the growth of sales volume and increases the fluctuation of the industry. The high rate of increase is largely due to the low efficiency of the channel, including the many agency links, high market points, low inventory turnover and high taxes and fees. With the gradual maturity and rationality of domestic consumers and the development of online shopping, international brands will further enter the Chinese market and reduce channel links, which will promote the price performance ratio of domestic brands and reduce the rate of increase. This requires brand to enhance channel efficiency and channel bargaining power.