The Policy Of Textile And Garment Industry Is Hard To Change.

In the second half of 2007 to the first half of this year, the textile and garment industry squeezed after a series of unfavorable factors, such as RMB appreciation, credit crunch, export tax rebate rate reduction, labor and raw material costs rising, and external demand slowdown.

Data show that in the first three quarters of 2008, the growth of the income and net profit of the textile sub sectors all showed negative growth. Among them, the printing and dyeing sub industries experienced a sharp decline in net profit in the three quarter, and the ROE level dropped by nearly 1.38 percentage points compared with the same period last year. The apparel sub industry grew steadily in the three quarter. Although the gross profit margin increased slightly compared with the same period last year, the net profit growth rate and the ROE level declined rapidly.

As a whole, the quarterly reports of the three listed companies in the whole industry showed a significant decline compared with semi annual reports.

Orient Securities analysts believe that the plight of the industry is mainly due to the following reasons: first, the inherent problems inherent in the extensive and high-speed growth in the past (concentrating on the front-end of the industrial chain, the low profitability of the whole industry and the overcapacity of low-end products); two, the contradiction between the gradual weakening of the international comparative advantage and the untimely upgrading of the industry.

The sustained growth of domestic macro-economy and textile industry, the appreciation of RMB, the continuous rise of human cost and various costs, and the rise of textile industry in neighboring countries (Vietnam, India, Pakistan, etc.) have made the comparative advantage of China's textile industry in the international arena gradually weakened.

With the decline of cost advantage, China's textile industry has not completed the pformation from low end to middle and high end in time, so the competition situation is becoming more and more intense. The three is the global economic recession and the decline of consumer demand triggered by the current financial turmoil, and the external oriented textile industry is also a positive blow.

The US, European Union and Japan's consumer confidence index in September was at its lowest level since 2006. The demand for textiles and clothing in Europe and the United States has declined. The textile and apparel products of the Canton Fair have clinch a total of 3 billion 420 million US dollars, down 39.3% from the previous one, and the turnover to the EU and the US decreased by 28.6% and 36.1% respectively.

Domestic consumption also began to decline.

The total retail sales of clothing consumer goods in October increased by 20.3%, 6.7 percentage points from the same period last year, which was lower than the social average for the first time since 2006. In September, the domestic consumer confidence index was 93.4, which was also a new low in recent years.

In order to promote the healthy development of the industry, the government has repeatedly issued supporting policies, including increasing financial subsidies, lightening taxes and fees, and raising the export tax rebate rate. A series of policies will have a positive impact on the industry, but most analysts believe that this can not change the downward trend of the industry.

Among them, Dongfang securities analyst said that the current policy has a certain effect on easing the pressure of the industry, but it can not fundamentally change the above problems that cause the current industry plight. Therefore, the future situation of the industry is still grim, maintaining the "neutral" rating of the industry.

Analysts at 26.38,2.40,10.01% said that the most critical factor affecting exports of textiles and clothing is the decline in demand in Europe and the US.

Before the European and American economies can be stabilized, the most important role in the policy of devaluation, raising the export tax rebate rate and financial support is to maintain enterprise management and ensure employment.

Domestic policy adjustment can not change the downward trend of exports, and can not reverse the operational difficulties of export enterprises, and it is difficult to improve the efficiency of export oriented listed companies.

An analyst at Anxin Securities said that in the second half of this year, the RMB appreciation rate has slowed down significantly, the credit tightening policy has been gradually liberalized, the export tax rebate rate has been raised twice in six months, and the cost of labor and raw materials has become increasingly stable. These unfavorable factors will be greatly alleviated in the second half of 2008 and 2009, and the external pressure of the industry seems to be easing.

However, in the second half of the year, the global financial crisis has led to a worldwide slowdown in the economy, which has led to a rapid decline in demand for textile and clothing, which is obviously more lethal to the whole industry. This decline seems to have just begun. Therefore, the new round of adjustment is caused by insufficient demand, and the industry profitability continues to decline. Even if optimism is expected to see the bottom of the industry profits in the first half of 2009, the industry boom is unlikely to recover quickly in 2009, and the entire textile and garment industry will be in a painful period of adjustment in 2009-2010 years.

Analysts at 21.51,0.61,2.92% believe that the current export related sectors account for 60%-70%, while the industry export situation in 2009 is not optimistic.

However, the growth of domestic retailing under the pressure of economic downturn is still defensive. At the same time, the continuous improvement of policies, especially the export tax rebate policy, may make the bottom trend of the industry obvious. Therefore, the overall rating of the industry is "neutral".

There is no obvious advantage in valuation. At present, the price earnings ratio of textile and apparel A shares is the lowest level since 2000, and the net market rate is also at an annual low.

Guotai Junan analysts believe that compared with historical data, the industry already has investment opportunities.

However, compared with similar overseas companies, the valuation of textile and apparel A share companies is still high.

According to Anshun securities analyst, as a whole, the valuation level of the industry is becoming more and more reasonable, so as to maintain the investment rating of the "synchronous big -A" in the textile and garment industry.

Yang Jing: editor in charge