Textile And Apparel: Clothing Consumption In The First Three Quarters Is Improving Month By Month, Focusing On Q4'S Traditional Sales Season.

1) to date, there are 83 A share listed companies, including 30 textile manufacturing sub sectors, and 53 home textile home sub sections. The proportion of China's textile and garment enterprises has improved in recent years, but overall is relatively low, about 0.2% in 2018. The domestic textile and clothing listed companies are basically consistent with the United States and Japan, with a small number of companies and a relatively low market value.

2) A shares accelerate the process of internationalization, and consumption leaders are the important direction of allocation. At present, there are 2 companies in the textile and garment industry (Semir apparel and Hai Lan home) become MSCI constituent stocks, all of which are large cap stocks. The inclusion of the full time Russell index was added to the ratio. Up to 2019/10/25, 31 funds were allocated to north capital.

3) the income of textile and garment industry increased slowly in 2013, and the net profit growth rate decreased year by year. Due to the weakness of terminal demand, the performance of garment home textile sector is divided. In 2018, the RMB exchange rate depreciated sharply and the profitability of textile manufacturing sector was better. Affected by net interest rate, ROE volatility declined.

4) under the background of the slowdown in the growth of retail sales of consumer goods, the prosperity of textile and clothing is stable. High end consumption recovery and public consumption stabilization. Textile industry boom declined in the two quarter, and business confidence in the three quarter is still strong.

5) the overall scale of the industry continues to grow, and the development cycle of sub industries is different. The competition pattern of textile and garment industry is scattered, and the industry has strong bargaining power. The bargaining power of textile manufacturers continues to improve: leading manufacturers accelerate production integration and overseas capacity layout.

6) many policies stimulate terminal clothing consumption, but Sino US trade friction affects textile exports. The quality of clothes and the environmental standards of production process have been continuously improved, resulting in the upgrading of enterprises' capacity and the acceleration of the clearance of small and medium-sized enterprises. The second child policy has been completely liberalized, and children's clothing and maternal and child consumption have become a highly prosperous track in the clothing sub field.

7) technological innovation: intelligent manufacturing, new retail and other factors to accelerate the growth of the industry.

Investment proposal as of October 25, 2019, the textile and garment industry has a rolling price earnings ratio of 23.38 times a year, less than the historical average since 2005 (31.32). Since the beginning of the year, the investment sentiment of the A share market has gone up, but the spinning and weaving board has limited growth. It is twenty-fourth in the 28 sub sectors of Shen Wan.

We believe that this is the right time to deploy beautiful products and still have valuations to repair space stocks. We continue to recommend Semir clothing (002563.SZ), 600398.SH, Be Meleven (002832.SZ), and 300577.SZ. As of 2019/10/25, the cumulative value of value / growth portfolio has been 20.99%/11.72% since the beginning of the year, winning SW textile and apparel index 15.06/5.8PCT respectively.