2021 Annual Strategy Report Of Textile And Garment Industry: Strategic Extension Waiting For Recovery

Brand clothing: the terminal continues to recover, high quality company performance differentiation. The outbreak of the new epidemic in early 2020 will affect the normal operation of the whole retail industry, among which the clothing for optional consumer goods will be greatly affected. From January to September of 2020, the textile and clothing category above the quota was 12.4% year-on-year, with an increase of 4.2% in August, which was the first positive growth since this year, with an increase of 8.3% in September. In each subdivision plate, sports shoes and clothing show high resilience, while the public clothing and high-end clothing are still in recovery. During the period of the epidemic, excellent terminal companies showed strong ability to recover from the epidemic.

The trend of embracing new retail actively and accelerating the layout of e-commerce is obvious. The epidemic situation has accelerated the development of e-commerce channels. From January to September 2020, the online retail sales of physical goods will increase by 15.3%, and the cumulative growth of clothing category will be 3% year-on-year. During the epidemic period, consumers were isolated at home, and their online time increased sharply. All brands actively arranged new retail, improved the trial of wechat app and wechat shopping group, and accelerated the layout of live e-commerce. For example, during the epidemic period, Desu fashion launched one store one mall, Hailan house layout live room, biyinlefen power line, etc.

Processing and manufacturing: the epidemic situation brings uncertainty, leading high-quality concentrated. Q1 is affected by the delayed resumption of work, and the start-up of enterprises is hindered. From Q2, with the aggravation of the epidemic situation in foreign countries, the demand side is under pressure. Industry accelerated shuffle, high-quality suppliers further confirmed their own strength, leading edge concentration. Textile manufacturing is a relatively mature industry, the upstream and downstream are closely related, and the market competition is fierce. As a result, large enterprises with a certain scale and complete the integration of upstream and downstream can ensure stable operation and obtain more market share.

Investment suggestions: the recovery of terminal sales since Q3, the expectation of cold winter in 2020 and the late lunar new year are beneficial to the whole brand clothing sector. From the fundamental point of view, the epidemic crisis has catalyzed the clothing company's new retail layout, efficient supply chain management, accelerated quality channel layout, and improved the overall operation capacity. From the perspective of valuation, the current brand clothing plate corresponds to the PE of 17x in 2020, which has a certain attraction. Specifically, quality companies still perform better than the industry average. The core recommendations are biyinlefen, Dishu fashion and SEMAR clothing.

Risk tips: the risk of slowing down macroeconomic growth; the risk of terminal consumption downturn; the second outbreak of overseas epidemic, affecting the export orders; the expansion of the company's stores is not as expected, the new business is not smooth, etc.; the risk of exchange rate fluctuations.