Textile Upstream Burst! Undervalued Global Capacity Leader In A Shares

This is another analysis in the pro cyclical project.

The recent trend is pro cyclical varieties. We have analyzed non-ferrous metals, construction, steel and coal in detail.

This time, let's talk about how the textile and upstream dyestuff industry has won capital's attention in the pro cycle.

Keep paying attention, and there's more to come.

[event outbreak point] the price rise letter of leading paper is expected to break the downward cycle of dyes

At the end of last week, a price increase letter from Zhejiang Longsheng, the leading dyestuff industry leader, not only opened up the whole range of dyestuff plate this week, but also is expected to lead the price of disperse dyes out of the downward cycle in recent years.

The main character of this price increase letter from Zhejiang Longsheng is "dispersing black ect black 300%", and the official announcement of the company said that its price would rise by 2-3 yuan / kg to 25 yuan / kg.

This letter represents more than just this company. Zhejiang Longsheng's position in the domestic dye industry can be reflected by two data: 300000 dye production capacity and 20% market share.

That is to say, every move of the industry leader can set off a storm in the industry.

The reasons for this price increase can be attributed to the recent recovery of terminal demand and the shortage of supply caused by weak demand in the first half of the year.

[event logic sorting] the original demand recovery + RCEP landing will expand the market boundary outward

The biggest end application market of dyes is undoubtedly textile and clothing. With the steady recovery of domestic economy, textile consumption has finally recovered, even exceeding the level of previous years.

According to relevant data, domestic textile and clothing retail sales reached 127.4 billion yuan in October, with a year-on-year increase of 12.2%. The monthly growth rate has not only recovered, but even reached the highest value since March 2018. After all, the concept of "cold winter" this year has not been fried for a day or two.

The obvious recovery of downstream demand has forced the upstream raw material cost to rise. In fact, this is also because the quantity of raw materials that can be provided by the upstream is really limited, and the textile demand in the first half of the year has indeed fallen to the bottom.

In the first half of the year, the epidemic situation in China has not been completely controlled, and the frequency of travel of consumers has been greatly reduced. The demand for clothing and clothing can not be compared with that in the past. After all, it is necessary to buy clothes if they do not go out?

Therefore, the downturn of textile and clothing has been transmitted to the dye industry, resulting in the direct result that most of the dye enterprises have suffered losses. Small scale manufacturers are unable to support daily production and are in the state of production suspension or semi suspension.

And until mid November, the price of disperse dyes fluctuated repeatedly, reaching a low point since 2017. The price is not clear, it is difficult to increase the output.

This also leads to the situation that the supply of products is in short supply after the demand recovers. In addition, the dye industry will also be affected by many factors in the future.

Vaccine enhances economic recovery, RCEP implementation is expected to directly benefit textile industry

The first is the breakthrough progress of the new crown vaccine. Pfizer's high-efficiency new crown vaccine has strengthened the market's confidence that the textile market demand will "recover as before".

In addition, the signing of regional comprehensive economic partnership agreement (RCEP) is expected to break the original scale of domestic textile industry and expand the border directly.

According to Tianfeng securities, China is the world's largest textile exporter. With the landing of RCEP, China's textile industry can combine its original industrial advantages with the labor cost advantage and tariff advantage of Southeast Asia to realize the transfer of production capacity, and at the same time, the original market scale can also be deepened.

As the market becomes larger and covers more consumers, the demand will naturally go up. In fact, the meaning of many trade agreements can be explained in this sentence, and so is the RCEP this time.

Once the demand of the terminal textile industry is developed again, it will be transmitted to the upstream dye industry, and the consumption will rise naturally.

[outlook for the future] the price of dyestuff is strong and the valuation of leading enterprises is still at a low level

Not only the demand side is expected to break through the border, but also the support from the supply side to the dye price can not be underestimated.

In recent years, environmental protection policies have changed the industrial layout of many industries, and the original inefficient production capacity of dye industry has been cleared to a certain extent. Therefore, it is expected that in the short term, with the recovery or even sharp increase of clothing demand, the price of raw materials and dyes will continue to rise, leading suppliers can wait for dividends.

If combined with the secondary market data, the rolling P / E ratios of several top suppliers are lower than 30 times, among which, the rolling P / E ratios of Zhejiang Longsheng and Runtu are 11.91 and 16.07 respectively.

[related stocks]

Zhejiang Longsheng: the company is the global leader in dyestuff and m-phenylenediamine / diphenol. The market share of dyestuff market is the first in the world. The output of disperse dyes has been ranked the top in the world for ten consecutive years. It has set up agencies and factories in many countries.

Runtu Co., Ltd.: the leading dyestuff in China, with a total production capacity of nearly 210000 tons, including 110000 tons of disperse dyes. The market share of product sales is steadily ranked second in the domestic dye market.

The above is edited by investment consultant: Yang Junhui (Practice No.: a0740619080002). The content is only for data display and does not constitute investment opinions. Therefore, the operation risk shall be borne by itself.