CITIC Securities - Weekly View Of Textile And Garment Industry

Abstract:

Core view

2019Q1 textile and garment industry is still under great pressure.

Brand clothing Q1 pressure is still in the same period, the overall growth rate was adjusted year-on-year; processing and manufacturing plate three elements weak performance, cotton prices in the short term stable, the exchange rate fully reflects, demand slow down.

Last week (2019.03.25-2019.03.31) textile and apparel lost to Shanghai and Shenzhen 300 (+0.45% VS +1.01%), ranking ninth in CITIC 29 industry classification.

Among them, brand clothing and textile manufacturing were up by +1.46% and -0.48% respectively.

Brand clothing: 2019Q1 pressure is still on, the overall growth rate was adjusted year-on-year.

From the monthly point of view, the overall sales in January were better than those in the Spring Festival. However, the growth rate dropped in February (after the Spring Festival), and the growth rate in March was expected to improve than that in February. But considering the increase in the overall consumption of clothing in March last year, the pressure in March this year is also not small.

From the overall trend of consumption, the economic downturn and consumption weakened in the second half of 2018, and the impact time and the extent of the impact of the apparel sector in the downlink cycle were in the middle reaches of the various sub sectors of the consumer industry.

The domestic brand clothing industry has not yet completed the process of leading screening, and the correlation between each subdivision industry and the economic cycle is relatively large.

According to our calculations, the key Brand Company's average revenue and net profit growth center dropped from double-digit to single digit (excluding factors).

The main reasons are: (1) the high base number of 2018Q1 under the combined action of various factors; (2) the number of spring festival days decreased in 2019, which is also the reason for the general decline of consumption in February 2019; (3) in 2019, the weather in 2019 was warmer than that in 2018.

(4) overall consumption is weaker than the same period last year.

Processing and manufacturing: cotton prices are stable in the short run, the exchange rate is fully reflected and demand is slowing down.

The three factors affecting 2019Q1 are still relatively weak, with cotton prices decreasing slightly in the short term and hardly rising. The elasticity of exchange rate decreases compared with before, while the internal and external demand slows down.

We judged that the income of the key companies in the first quarter was generally rather dull.

Risk factors: 1. macroeconomic slowdown; 2. production capacity expansion less than expected, cotton price volatility, etc. 3., overseas economic downturn and accelerated appreciation of the renminbi will increase the pressure of processing enterprises.

Investment strategy.

(1) looking for potential underscores in the subdivision industry, with core competitive barriers, and gradually configuring and holding them in the process of reasonable valuation or wrongful killing: focusing on Anta sports and Semir costumes, focusing on Hai Lan's home, Taiping bird, Song Li Si, Jiangnan Buyi, Lining and an Zheng fashion.

(2) looking for subdivision areas and companies that are anti cyclical, for long-term concern and layout, Shenzhou International (best quality supplier), Kai Run share (successful pformation brand business, the ultimate product niche increment market), and short-term suggestions to pay attention to the rising price of the beneficial dye and the low value printing and dyeing leading airline shares.