Cotton Throwing And Storage Policy Will Rebound In Space May Be Limited

Ferrous metal futures rose sharply in recent years, and international iron ore prices hit the biggest intraday rise since 2009.

We are judged that the price of black metal is also rising. As one of the commodities, cotton is also expected to usher in a price rebound. However, it is subject to high inventory of national cotton reserves and cotton will be introduced in the near future.

The rebound space may be limited.

Commented cotton price has dropped more than 4 years from the top 34 thousand in 2011, and we expect cotton price to rebound in recent years, but the upcoming dumping and storage policy and high inventory of national cotton reserves may restrict the rebound of cotton prices. At present, cotton price has burst, the bottom of the market is expected to be 13 thousand, and it is on the verge of falling below 12 thousand.

We analyzed that although cotton planting area at home and abroad showed a 20% decrease, cotton prices continued to decline because of: (1)

There are still 11 million tons of inventory, which will inhibit the rebound of cotton prices; (2) the demand for downstream clothing is sluggish.

The color spinning enterprises are relatively elastic: considering the impact of cotton prices on different subdivision industries, (1) cotton costs account for a different proportion of production costs in cotton spinning companies: Lu Tai is around 60%, and Baron East and

At about 80%, this is mainly due to the difference between the color dyed fabric and the colored spinning industry. (2) in the cotton purchasing channel, the domestic purchase ratio is less than that of the imported and self owned cotton: 23% of the Lu Tai, and about 50% of the Baron East.

The increase in cotton prices is conducive to the promotion of order prices and gross profit margins: the impact of cotton prices on the industrial chain is mainly reflected in: (1) the influence of order prices: some cotton spinning enterprises have strong bargaining power, and they can make foreign cotton pricing, but most of the domestic small enterprises are still pricing in cotton. (2) the cost of inventory is affected. At present, cotton textile enterprises include cotton production, domestic purchase and import, because the import quota is limited, the domestic cotton planting area is reduced, and domestic cotton purchasing is still the main reason. Cotton spinning enterprises generally reserve 3 months ahead of time, and low price stock is expected to benefit and contribute to gross profit margin in the cotton price rising cycle.

Investment proposals combined with basic and previous cotton prices rebounded, Huafu color spinning and Baron East greater elasticity, new race shares, new agriculture development for all cotton prices rebound rally stocks, Lu Tai, Tianhong textile, mutual textile, Wei Qiao textile valuation is low, as a cotton spinning leader will also benefit; from the industry chain, Shenzhou International Clothing manufacturers as the middle and back end, the latter is also expected to benefit.

It is recommended to pay attention to A shares Lu Tai (16 years 12 times P/E), H-share mutual textile (16 years 13 times P/E), Wei Qiao textile (16 years 5.5 times P/E).