Textile And Clothing: 2020 Annual Report Prospect, 2021 Q1 Prospect

Consumer confidence recovered steadily and the industry was in a good mood in peak season. 1) Consumption recovered steadily. In December 2020, the zero value of clothing, textile, cosmetics and jewelry increased by 3.8% / 9.0% / 11.6% (the total amount of social zero increased by 4.6% in the same period). E-commerce led the growth of the whole year. In 2020, the online retail sales of physical goods increased by 14.8% (the total amount of social zero decreased by 3.9%) in 2020, including 30.6% / 5.8% / 16.2% for food, clothing and use. 2) In 2020, the terminal recovery is good. In January 2021, it is affected by peak staggering and base number of Spring Festival, but Q1 recovery trend continues. We believe that the consumption intention is gradually desensitized to the fluctuation of the epidemic situation. The clothing / Jewelry / cosmetics / home textile industry ushers in the autumn and winter sales peak season, and the post Spring Festival and intensive e-commerce Festival drive the good trend of 2021q1 to continue.

Sports shoes and clothing: the leader of high boom track industry chain has excellent performance. The sports shoes and clothing sector performed steadily under the impact of the epidemic, and the leading companies performed better in the process of rapid recovery of the follow-up terminals, focusing on Anta sports and Shenzhou International.

(1) manufacturers: Shenzhou International orders and capacity repair are accelerating. According to our tracking, the recruitment progress of Cambodia's new factories exceeds the original expectation. We expect that the company's performance will grow slightly in 2020 (affected by exchange rate fluctuations) / it is expected to reach about 20% in 2021. ② Brand & Retailer: according to our tracking, the recovery of the companies in the Q4 sector in 2020will accelerate. We estimate that Anta sports / Li Ning / taobo will achieve steady growth in the whole year of 2020, and it is expected that the month on month improvement in 2021q1 will continue.

Mass clothing: inventory optimization lays the foundation for growth. 1) The terminal adjustment continues. According to our tracking and prediction: ① bosden's performance since January 2021 continues the high-quality growth trend from April to December 2020, and we expect that the revenue growth rate of bosden brand in fy2021 can reach 25% - 30%. ② The annual flow rate of children's wear / casual wear of SEMAR clothing is expected to be flat / 20%, and the annual flow rate of children's wear / leisure wear is expected to decline by 20% in 2021q1 (taking into account the difference of epidemic base). ③ The annual income of taipingniao is expected to double-digit growth in 2020. It is estimated that the water flow will decline in the first half of 2021q1, but it will recover in the second half (considering the difference of epidemic base). 2) The lightening of channel inventory laid the foundation for subsequent growth. At present, the inventory of the plate was basically cleaned up. By the end of 2020q3, the turnover days of Senma clothing / taipingniao / Hailan home were 181 / 207 / 338 days respectively.

High end clothing: stable terminal and optimized efficiency. 1) According to our estimation, the revenue / performance of biyinlefen in 2020 is expected to increase by 10% - 15% / 15%, and continue to maintain a high growth trend in January 2021. ② In 2020, the revenue / performance of Deshi fashion is expected to be flat and slightly increased, and the flow rate of 2021q1 is expected to achieve 20% + growth. 2) Channel end: high quality stores continue to expand + operation quality is improved. We think that the efficiency of stores is expected to improve in 2021, and it is estimated that there will be about 150 stores in biyinlefen.

Investment advice. 1) From top to bottom, we are optimistic about the track of sports shoes and clothing, and recommend [Shenzhou International, Anta sports, Li Ning, taobo], which correspond to the PE of 34 / 44 / 54 / 27 times in 2021. 2) Recommend high quality objects with stable operation:

When the peak season comes to boost sales, the corresponding PE in 2021 is 19 times, and that in 2021 is 10 / 15 times of that in 2021. 3) It is recommended that the marginal improvement of [SEMAR clothing] corresponds to 16 times of PE in 2021.

Risk tips: the impact of Xinguan epidemic exceeded expectations; terminal consumption downturn risk; the expansion of stores of each company was not as expected; the new business development was not smooth.