Concerned About The Opportunities Brought About By The Revitalization Of Clothing Industry

Event description: in January 14th, the adjustment and revitalization plan of the steel and automobile industry has been approved by the State Council, and the next revitalization plan has become the focus of attention of the market.

It is understood that the textile industry has been included in the fifth pillar industries in the industrial restructuring and revitalization plan formulated by the Central Committee, ranking first in light industry after ranking four major industries of iron and steel, automobiles, shipbuilding and petrochemicals.

In January 21st, according to the first textile net, the three year plan for revitalizing the textile industry (09-11), jointly drafted by the NDRC, the Ministry of industry and the China Textile Association, has been submitted to the State Council for examination and approval.

Taking into account the outstanding difficulties faced by the textile industry, the revitalization plan is expected to take the lead in the near future.

Comments: 1, the background: the tide has receded, revealing all kinds of devastation, becoming exports and losing exports. The last round of the world economic boom has blown the bubble of China's textile economy, and the Chinese textile industry has ushered in her golden age under the rapid growth of export.

Under the impact of the current financial crisis, the export of textiles and clothing has been greatly reduced, and domestic demand has also grown sluggish. When the economy is ebbing, the problem of extensive growth in the industry has gradually emerged over the years, and the decline in exports has ignited the industry crisis.

After the tide receded, the devastating textile industry needed the support and revitalization of the government.

2, the short-term role is more obvious is bank credit and continue to raise the export tax rebate, but the long-term role of Limited Bank Credit: in the case of export decline and domestic demand reduction, the tension of capital chain is the most important problem facing most enterprises, so the expansion of banks' credit scale to the textile industry has strong pertinence.

However, judging from the market structure of the industry, the polarization of textile enterprises is serious, and a large number of small and medium enterprises are marginalized. Under the background of sustained downturn in the industry boom, it is more difficult to obtain funds through regular channels such as banks.

Therefore, the preferential policy of bank credit is difficult to play the effect of "universal benefit".

The export tax rebate was raised: in the past 08 years, the government has raised export rebates twice, but the export of the industry has not been significantly recovered. The market's expectations of its increase to 17% have never cooled.

The export tax rebate rate increases correspondingly reduces the cost of the export enterprises. In the short run, it increases the ability of the exporters to reduce prices for orders, and promotes the growth of export revenue when the export demand elasticity is relatively large. The short-term stimulation effect on the export of the industry is more obvious, and it can boost the weak export growth to a certain extent.

However, the core driving force for export growth lies in the world economic situation and international trade environment.

With the current export situation continuing to deteriorate, the market space has shrunk sharply, and the elasticity of export demand may continue to drop to a very low level. The effect of the export tax rebate increase has been greatly reduced.

But at the same time, we think that raising the export tax rebate is not consistent with the industrial policy of adjustment and upgrading, so it is doomed to be short-term and phased.

3, in the long run, industrial adjustment and upgrading will effectively enhance the competitiveness of the industry. However, the deep-seated causes of the current industry predicament are the poor innovation capability, low technology level and extensive management mode.

The long-term competitiveness of textile enterprises is mainly reflected in the aspects of technology, scale, brand and channel. The content of the revitalization plan will basically focus on improving the technology level, improving the concentration of industries, strengthening the adjustment and upgrading of brand and channel construction.

(1) the discount policy of technical pformation funds -- the main reason for the low profitability and competitive strength of China's textile industry lies in the low degree of technological contribution and the serious homogenization of competition. The government is expected to improve the technical content and differentiation degree of textiles through the discount policy of technical renovation funds. However, the possibility that small and medium-sized textile enterprises will get financial support is less likely. Most of the large textile enterprises with government background are most likely to be supported.

(2) support the integration of advantageous enterprises. The main reason for the poor ability to resist risks in China's textile industry is the low concentration of industries and the large number of SMEs. The government is expected to cultivate a large number of textile enterprises with scale advantages and core competitiveness through encouraging and promoting mergers and acquisitions. In the process of government driven industrial integration, large state-owned textile enterprises may be integrated platforms.

(3) to support brand and channel construction, brand and channel have always been the lifeline of the development of garment enterprises, but our brand clothing enterprises are few and the sales channels are not perfect. This leads to the low added value and weak competitiveness of the industry. The government hopes to cultivate a strong number of national brands through strengthening the construction in this area, and it is a place for local enterprises to enter the domestic market with international brands.

In terms of policy, there may be bank credit and preferential tax.

(4) start the rural consumer market. In view of the decline in textile demand, the government may follow the model of "home appliances to the countryside" to promote the expansion of rural consumer market.

In terms of policy implementation, it is possible to directly subsidize textile enterprises so as to reduce prices, or to issue textile shopping vouchers to rural residents.

We believe that these policies will have a long-term effect and will gradually change the appearance of China's textile industry. But at the same time, these policies have limited short-term effects, mainly on the promotion of confidence. After all, far water is hard to solve.

4, maintain the "neutral" rating of the industry, and suggest that we should pay close attention to the trading opportunities of listed companies of beneficiary companies. We believe that in the short term, enterprises with larger export proportion, stable export orders and certain bargaining power will benefit from the increase of export tax rebates, mainly including Rebecca, URI, A and so on.

In the medium to long term, enterprises with independent R & D capability and strong innovation capability will benefit from technical support and encourage innovation policies, mainly including yeco technology, Jinying shares and Weixing share.

A few "brand + channel" business enterprises in China have obvious preemptive advantages. They will benefit from brand and channel support policies for a long time. They mainly include American state clothing, seven wolves, good news birds, etc.

Huafang textile, China clothing and China Textile investment and other large state-owned textile and garment enterprises in the government to promote the process of industry integration, may benefit as an integrated platform.

We maintain a "neutral" rating of the textile and garment industry, and suggest that investors pay close attention to possible trading opportunities.