Capital Focus: Brand Driven Clothing Leader Upstream Focus On High Quality Manufacturing

Since this year, plate growth is better, fund positions increased. The textile and clothing sector index rose 0.25% since the beginning of the year, outperforming CSI 300 (down 6.25%). By segment, the textile manufacturing sector index fell by 0.76% compared with the beginning of 2021, while the clothing and home textile sector index increased by 1.07% compared with the beginning of 2021. In 2021q3, the proportion of fund positions in textile and clothing sector accounted for 6.57% of the total equity of the company, an increase of 3.86pct compared with the beginning of 2021. In terms of sectors, the proportion of positions held by the textile manufacturing sector in 2021q3 and that in the clothing and home textile sector has increased significantly compared with the beginning of 2021.

Trend 1: the sports apparel industry has a stable and high growth, and the Winter Olympics plus national tide factors help the industry develop. The total scale of China's sports industry will be 45.29 billion US dollars in 2020, with a compound growth rate of 13.54% from 2015 to 2020. According to Euromonitor forecast, China's sportswear industry will continue to maintain a high-speed growth trend in the next three years, with a growth rate of about 12.2%, and the scale will be further expanded. 2022 Winter Olympic Games will bring performance growth momentum to sports industry manufacturers, and major local brands continue to increase investment in sportswear design and marketing. Major manufacturers will further introduce traditional cultural elements into the design, and the catalysis of Guochao culture is expected to enhance the leading brand sales and brand influence.

Trend 2: cotton price support brings price bonus, and stable production capacity guarantees the performance of leading enterprises. Affected by the epidemic situation, the global cotton production is lower than the level before the epidemic, and the domestic cotton supply is insufficient for a long time. The gap between supply and demand supports the continuous rise of cotton prices, which brings high price dividends to yarn manufacturing enterprises. At the same time, due to the normalization of foreign epidemic situation and strong foreign demand, the export volume of textile and clothing increased by 16.7% year-on-year in October, and the return of orders from upstream textile industry further improved the performance of textile companies. With the gradual improvement of the epidemic situation in Vietnam and other major production capacity areas, the production capacity of domestic textile enterprises in Vietnam is gradually restored, and the performance of leading enterprises is expected in the future.

Trend 3: under the background of epidemic recovery, China's leading performance recovery will continue to be optimistic. With the continuous development of new coronal vaccine and specific drugs, the global epidemic is expected to be effectively controlled in the future. The total textile retail sales in q1-q3 of 2021 increased by 19.84% compared with the same period in the same period, and it has exceeded the same period in 2019. Under the background of epidemic control, it is good for the recovery of textile and clothing demand. Domestic textile and garment leading enterprises have strong performance recovery after the epidemic, and long-term performance is expected. Under the support of good performance, leading enterprises are expected to go out of the undervalued area, and the valuation will continue to repair in the future. Domestic leading companies have advantages in designing channels and supply chain, which provide guarantee for the performance of leading enterprises. Key recommendations

In the current situation, we are still concerned about the subject of better performance recovery. In terms of upstream textile manufacturing, Vietnam's production capacity is expected to recover, and Huali group, Shenzhou International and kairun Co., Ltd. with complete production capacity layout are recommended. Downstream clothing enterprises should optimize the sports track and add the support of the national tide of the Winter Olympics. The sports industry enterprises recommend Anta sports, Li Ning and Tebu international. The public clothing brands recommend Hailan home, Senma clothing and taipingniao. The medium and high-end clothing brands recommend biyinlefen, bosden, Goliath and local fashion.

Main risks faced by rating

The epidemic situation was repeated, market competition was intensified, and the risk of cotton price fluctuation was not as good as expected in Vietnam.