Analysis On Investment Suggestions Of Securities Companies

Investment suggestions of securities companies

At present, the epidemic situation is repeated in many places in China, and clothing as an optional consumer category is greatly affected. On the contrary, the demand fluctuation of upstream textile and garment enterprises facing the global market and the global distribution of production bases is relatively small; At the same time, the competitive pattern is clear and stable, and high-quality leading enterprises drive steady growth through orderly expansion of production capacity. In the environment of repeated epidemic situation and devaluation of RMB, it is suggested to pay attention to the textile and garment track with stronger anti risk ability.

　　 broker investment reason

Review of global textile and garment industry development. The textile and garment industry chain mainly includes yarn production, fabric processing and garment manufacturing. More than 50% of the production costs in each link are raw materials, and the rest are mainly labor wages, energy, manufacturing costs, depreciation, etc. Under the background of global division of labor, cost driven textile and garment enterprises have experienced several rounds of migration, and are currently transferring to South and Southeast Asian countries with rich labor resources and low cost, and with preferential income tax and tariff policies; However, most of the emerging clothing exporting countries are mainly engaged in the labor-intensive garment OEM, and the textile manufacturing links with deep technology accumulation still rely on outsourcing. China's position in the global textile and garment industry is indispensable. With its excellent localization advantages and industrial cluster scale advantages, as well as the deep accumulation of technical barriers, China has been the world's largest textile and clothing export region for a long time since 2010. In particular, the proportion of relatively high value-added textile exports in the global total exports is still rising, There is still a good development prospect in the future.

The global textile and garment industry has changed in recent years. In recent years, with the rapid growth of global sports shoes and clothing market and the strong growth of head brand income, the order volume of knitted products suppliers has achieved a good growth. In contrast, the number of textile and garment factories cooperated by the head brand is shrinking, reflecting the trend of head and centralization in the supply chain.

Shenzhou International: a leading global knitwear manufacturer with solid growth. Shenzhou is one of the largest vertical integrated Knitting Manufacturers in the world. The management focuses on the main textile manufacturing industry and has rich experience. The formulation of major development strategies is forward-looking. In the initial stage, it aims to locate the medium and high-end market with great development potential, and accumulates experience through cooperation with UNIQLO; In terms of production capacity, it took the lead in laying out high-quality production bases in Cambodia and Vietnam, realizing certain capital accumulation, and exploring expansion opportunities in Indonesia, Egypt and other places. Shenzhou is highly related to the revenue growth of the four major customers, but at the same time, it shows stronger robustness - the brand faces the fluctuation of global consumption demand, but Shenzhou has abundant orders, and its revenue growth is mainly driven by its own capacity expansion. We believe that the main competitiveness of Shenzhou to bind the four major customers and continuously increase the supply share are as follows: 1) the vertical integration ability improves the supply chain efficiency; 2) The production layout of China + Southeast Asia meets the needs of customers for low-cost, stable and decentralized supply; 3) Strong fabric development ability brings differentiation competitive advantage; 4) Pay attention to environmental protection and production.

Profit forecast and valuation

Maintain the profit forecast, investment rating and target price of our covered companies unchanged. It is suggested to pay attention to the investment opportunities of textile and garment track with high prosperity and stable competition pattern, and mainly recommend Shenzhou International (net profit of 2022 / 23e increases by 51% / 32%, corresponding to P / E 24x / 18x).

　　 broker investment risk

Domestic and foreign epidemic situation repeatedly, raw material prices fluctuated significantly, and the RMB rose sharply.