2015 Is Coming To An End. Where Will Investment Opportunities Be Next Year?

2015 is coming to an end.

The cumulative increase is ahead of the competition, winning nearly 70 percentage points in the market, where are the reasons for the rise of the textile and garment sector ranking and the improvement of the demand side? What are the investment opportunities and ideas for next year?

There are two main reasons for the rise of textile and garment sector this year. The first is related to the whole macro-economic background. The competition of brand resources is caused by the diversification of the channel expansion. Second, there are some structural changes in the whole brand clothing sector. Third, the main sector of the plate is down, but the cash flow is good, the market value is small, and the market is expected to have a pformation and reorganization of the plate.

In addition, the structural change of demand side of textile and garment industry is very obvious. The company that holds structural changes will have good performance.

Aiming at next year's textile and garment sector, we can grasp three main lines, sports consumption brought by demographic changes, and pformation of her economy and business.

However, investors should also pay attention to the two major risks, the impact of cotton prices and the long-term impact of the TPP agreement.

Two major reasons for the rise of textile and garment sector

What is the reason why textile and garment sector ranks the top this year?

First of all, the overall macroeconomic background, a major trend in China is the extensive expansion of channels. We have not only department stores but also shopping centers.

The supply itself is over; at the same time, there are still many competitive e-commerce platforms.

Therefore, in this case, we deeply feel that brand is king in the process of channel expansion, that is, a brand may be contended by multiple channels under the online and offline channels, and its entire profit and performance will be relatively better.

Second, there are also some structural changes in the whole brand clothing sector.

For example, from a global perspective, like sports Nike, Adidas, and many "fast fashion" brands are very popular, some leading brands in mainland China have achieved great success. Compared with traditional brands, their typical characteristics are: inventory turnover is very fast and the rate of markup is low.

The rate of increase is an important index for us, which is equivalent to the retail price divided by its production cost.

In this multiple, the traditional brands need to turn around for two hundred or three hundred days, and then the rate of increase is 5-8 times. But the leading brands who operate under the new mode may have 100 days' turnover, and the increase rate is only 2.5-3 times, for example, the production cost of 100 yuan is sold to consumers only 250-300 yuan.

From the perspective of global consumption trends, young people prefer brands with high cost performance, fast fashion and leisure sports.

After several years of adjustment, has the demand side of textile and garment industry improved? Has the industry fundamentals been improved?

If we talk about demand side, it is the structural change I just mentioned.

In the past, China has experienced such a stage, especially in the 2004 and 2005, when the department store industry was particularly prosperous. At that time, if the price of a suit was 999 yuan, it was not easy to sell. Before it was added 2 and 3, it sold immediately, and even some of the companies in history sold suits of tens of thousands of yuan. At that time, the clothing consumption preference was "not expensive or not", because there were no smart phones and so on.

The soft consumption of tourism, fitness, entertainment and so on has not yet risen, so many people feel that wearing beautiful clothes is the embodiment of self value.

But now, the real change in the demand side is that young people want to spend less money on more styles.

Young people will make purchase decisions in three aspects: first, the price, the price must be low, then the quality is better, the two aspects are cost-effective, and another factor is fashion.

It must be said that clothing consumption demand has increased substantially. This is not true, but its structural change is very obvious.

Companies that grasp structural changes have good performance.

Grasp three main lines

What are the investment opportunities and ideas of the textile and garment industry next year?

We are concerned about some changes in population structure. There are three ideas for reference: 1) the demand for health, tourism, sports and fitness brought about by aging; 2) the economic needs brought by the increase of women's income; 3) the development of fan economy and brand electric business brought about by the increase of average consumption tendency after 90 years.

We are very optimistic about the sports industry. We think that sports consumer goods are rising again in China. In 2008, they were at the top of the sales volume, and the recovery is still hoping for a new high.

Her economy, including underwear, accessories, women's wear, jewelry, cosmetics, cosmetic surgery, children's consumption and so on, is more likely to achieve better market performance.

We also need to see opportunities for business pformation, on the one hand, slow turnover, high price conversion to fast turnaround and low price. On the other hand, there is also an opportunity to pform the electricity supplier mode.

We also see that some brands are directly online, there are no stores on the line, but they can achieve high sales revenue and have been recognized by consumers.

Two risks need attention

What risks should investors pay attention to?

There are still a lot of risks. The first is cotton prices.

Cotton prices directly affect the performance of upstream enterprises. At present, cotton prices have fallen below the 13 thousand expected bottom of the market. We think there are two reasons. First, the pformation of cotton from purchase and storage to direct subsidy. First, there is still 11 million tonnes of inventory pressure on state-owned cotton, so there is limited space even for anti ballistic missiles.

We have made systematic historical data analysis, and some market points of view believe that cotton prices fall well, and the gross profit margin of cotton spinning enterprises is improved. However, most cotton spinning enterprises have low bargaining power. Once the price of cotton falls, the order price will drop correspondingly. At the same time, the cotton flower inventory that has been stocked for 3 months in advance will also damage the gross profit margin.

Therefore, we regard this industry as a typical "Pro cyclical" industry, that is, cotton prices rise, profits are good, cotton prices fall and profits are poor.

Another is the long-term impact of the TPP agreement on China's textile and clothing exports.

The cost of labor, water and electricity in China is higher than that in Southeast Asia, such as Vietnam and Kampuchea.

In the medium to long term, the tariff cost between TPP countries will also be greatly reduced, and the long-term goal is zero tariff.

At present, due to the lack of skilled labor and supporting facilities, Southeast Asian countries are still mainly engaged in simple garment processing, such as printing and dyeing, high-end dyed fabrics and so on. However, the overseas pfer of textile enterprises' capacity and the replacement of Southeast Asia are the major trends.