Medium Term Strategy Of Textile And Garment Industry: Brand Undertaking Reputation And Repeat Purchase

Institution: Huajin securities

Rating: leading -A

Investment points

In the first half of the year, the retail market of spinning and clothing was reviewed: the SW retail and SW spinning clothes were not performing well in May. Trade and retail sales rose by 6%, seventh in the fall and 9% in textiles and clothing. The concept of masks and the performance of supermarket industry rose by 51% and 28% respectively. Another daily chemical rose 27%. Due to the impact of the epidemic on the industry performance except for the supermarket industry, the valuation of typical consumer sectors has been increased.

The online growth rate is consistently higher than that of the under line, and the high frequency category supports the line. In terms of channels, the domestic zero growth rate has slowed down in recent years. In 2015, the growth rate of domestic zero was maintained at 10%~11% in the month and slowed down to 7%~8% in 2019. Online growth has slowed, but continues to grow faster than offline growth. Sub category, clothing and cosmetics business channel rapid growth, 1/2 clothing and 1/4 cosmetics consumption is expected to come from online. Looking ahead, the electricity supplier is expected to continue to maintain more than 10% growth. According to Kayu, the domestic electricity consumption ratio is expected to rise from nearly 19% in June 2019 to 28% in 2025, with an annual compound growth rate of about 11%. The trend of structural impact of channel on brand competition will continue.

The volume of consumption continues to tilt on the line, and the growth under the line needs high frequency category support. The pursuit of growth under the offline channel needs to be supported by the high-frequency consumer goods differentiated from the electricity supplier. Fresh products are better high-frequency consumer goods. According to the prospective research institute, about 69% consumers consume fresh food at least once a week. Yonghui supermarket and Jia Jia Yue are relatively high fresh companies, accounting for over 40% of fresh category revenue, laying a solid foundation for passenger flow under the line and promoting Yonghui supermarket and Jia Yue Yue channel expansion.

Cosmetics and sports as the advantage track, the status of domestic brands has improved: category, textile and apparel, sportswear and children's wear are better categories in recent years, regardless of the impact of the epidemic, the growth rate of domestic sports apparel and children's clothing is higher than the overall growth rate of clothing. In recent years, domestic brands have gradually improved their product quality, and the status of domestic brands has been continuously improved. In sportswear, Lining and Anta brands have increased by about 30% and 15% respectively, which is faster than that of the industry. Cosmetics are another fast growing industry. Compared to 2009, the growth rate of domestic public toiletries and high-end cosmetics has increased significantly in 2018.

The competitiveness of domestic brands has gradually increased from price strategy to quality strategy: in recent years, domestic brands have continuously improved their quality and promoted the recognition of consumers. According to know Meng consulting, nearly 87% of consumers in 2017 thought that the quality of overseas brands was better, and by 2020, the proportion had dropped to 34% rapidly. Brand management also recognised domestic brands more. According to Ali Research Institute, over the past 5 years, the proportion of executives from multinational enterprises to local enterprises is 5 times the opposite direction. From the perspective of brand development, in 2017, the cosmetics brand represented by perfect diary relies on the price competition of the electricity supplier channel. And by 2018, the brand represented by Hua Xizi has gradually improved its grade and cut into the mid price band. The competitiveness of domestic brands is also reflected in the improvement of market share. In the children's wear, the percentage of Barbara City has increased from 4.9% in 2017 to 6.9% in 2019. In the cosmetics, the market share of pelera and pill beauty brands were estimated at 0.6% and 0.4% respectively in 2019. In the sports brand, the market share of Lining increased from 5.2% to 6.3%, and the market share of Anta brand remained at about 11.1%.

Business and mergers and acquisitions help domestic brands, and are expected to gradually develop into an international group: looking forward to the future, domestic brands still have room for growth. Such as cosmetics brand, the overall market dispersion. Head brand Paris L'OREAL has a 3% share in the domestic market, corresponding to about 15 billion of sales. Compared with the head brand, the sales of pelera 2 billion 700 million yuan and the beauty brand 1 billion 700 million yuan still have much room for sale. It is expected that the opportunity of rapid growth will be achieved in the market that has not yet been solidified by virtue of e-commerce channels and domestic brands. On the other hand, the growth of overseas brands is mainly due to the high growth of e-commerce channels. In recent years, the proportion of domestic clothing brand e-commerce channels has increased. In 2019, Lining and other domestic head sports brand electric business accounted for about 20%. Quality improvement and gradually recognized by consumers, superimpose the rapid growth trend of the electricity supplier channel, or will continue to grow faster in the future.

Online consumption has returned to normal, and offline passenger flow is still affected: the epidemic affects domestic consumption, and consumption continues to recover in the near future. In May, the growth rate of domestic zero and above quota was further improved than that in April, and the social decline narrowed narrowed from -7.5% in April to -2.8%. According to the channels, online consumption has resumed normal growth rate of 15%~20% in April, and the growth rate in May has further increased to 22%. After the outbreak, consumer sentiment has affected the passenger flow below the line. Mia's technology data show that the passenger flow under each channel has a decrease of 8%~33%. The holiday public transport volume can reflect some consumer sentiment. In early June, the typical urban holiday subway passenger flow further recovered to about 70% before the epidemic, which was further improved compared to 64% in May.

The consumption coupons help to release potential, and there is greater power in every region to create consumption Festival: after the outbreak, China has issued several programmatic measures to promote consumption stability, through steady domestic demand, steady employment and stable economy. For example, the Ministry of Commerce and the NDRC issued a document in February to continue the spirit of promoting consumer documents and promote the release of domestic consumption potential. Under the guidance of a steady and steady programme of consumption, the consumption voucher is promoted in some parts of the country to promote consumption. In terms of the consumption coupon in Hangzhou in March 27th, the consumption coupons of 50 yuan per person promote an additional consumption of nearly 125 yuan per capita. In addition to consumer coupons, some parts of the country have greater motivation to create consumption festivals. For example, in May, Shanghai held the 55 Shopping Festival to promote consumption supplement, superimpose the consumption sentiment of the first day holiday and release the epidemic situation. In May, Shanghai retail online was nearly 100 billion yuan, and the retail sales exceeded 140 billion yuan under the line. There are also non heritage shopping festivals around the world to promote online consumption of intangible cultural heritage products.

Investment advice: according to the above channel, category and brand logic, we suggest that: (1) electricity supplier related: Antarctic electricity supplier. (2) children's clothing category: Semir clothing; (1) sports category: Lining, Anta sports; (3) feather down Faucet: Bosideng; (3) cosmetics category: Shanghai Jahwa, Huaxi biology, pelaja and pill Mei shares; (4) fresh supermarket: Yonghui supermarket, Jia Jia Yue.

Risk warning: (1) overall consumption: the epidemic affects consumer confidence; consumption policy is not as good as expected; Sino US trade relations are unstable. (2) textile and clothing: clothing consumption low frequency, more partial optional consumption; epidemic and warm winter brought the industry to stock pressure; industry competition intensified or the company was in the stage of scale protection; the two quarter textile manufacturing orders were greatly affected. (3) commerce and retail: the passenger flow below the line is restored or is not as good as expected; the mask reduces the time spent outside, and the consumption of the selected goods is reduced. (4) daily chemicals: overseas brand promotion aggravated industry competition; marketing transformation or resulting in no increase in profits.