Trend Review
Last week (February 27 to March 3), the Shanghai Composite Index fell 1.08% and the Shenzhen Composite Index fell 0.45. The textile and apparel sector rose by 0.04%, with the textile sub-sector rising by 0.76% and the clothing and home textile sub-sector falling by 0.31%. The top three increases and decreases of key stocks in the textile and clothing sector are Sanfu Outdoor, Elise, and Peacebird (7.38%, 4.90%, 3.79%); the last three are Semir Apparel, Huasi Shares, and Rebecca (-5.40%, -5.24%, -4.92%).
Industry News
1. National Development and Reform Commission: Domestic cotton prices were stable but fell in January;
2. Hong Kong’s retail industry’s decline narrowed to 0.9% in January;
3. Sales of Victoria’s Secret parent company plummeted 10% in February;
4. Fast Retailing Group announced the complete list of 146 Uniqlo suppliers;
5. AmorePacific’s stock price plummeted 12%;
6. ANTA launches customization business, and “ANTAUNI” is officially launched.
This week’s opinion
Last week, a number of listed companies released their 2016 performance reports. Judging from the 35 disclosed textile and apparel companies, the performance differentiation is relatively obvious. The fundamentals of some sub-sectors continue to be under pressure, but overall there are signs of gradual stabilization. Regarding the disclosed performance reports, we believe that we can pay attention to the following characteristics to provide reference for sector investment during the intensive disclosure period of subsequent annual reports and first quarter reports:
1) The income side of mid-to-high-end clothing categories has recovered well in Q4: Against the background of the recovery of terminal retail sales and the rebound of department store passenger flow, mid-to-high-end clothing categories such as high-end women’s clothing and men’s clothing have benefited significantly, and their performance in 2017 is still worth looking forward to;
2) The overall operating performance of listed cotton spinning companies in 2016 was excellent: Benefiting from the depreciation of the RMB and rising cotton prices, the operations of listed cotton spinning companies improved significantly in 2016, with increased profitability being an important feature of operational improvement;
3) Home textile income growth has accelerated significantly, or it may benefit from the real estate sales peak in 2016: Generally speaking, home textile consumption lags behind real estate sales by 6 to 12 months. This round of real estate sales peak has gradually appeared to promote the demand for home textiles, and the positive impact is expected to be in 2017 Continuation;
4) The decline in financial management returns in 2016 affects the profit growth rate of clothing companies: the impact is particularly obvious for listed clothing companies with abundant cash flow. Guoxin Textile and Clothing’s March portfolio: Fiyta, Elise, Aokang International, Jiumuwang, Huafu Colored Textile, Shanghai Jahwa;
Core investment main line
1. Focus on the market recovery in mid-to-high-end consumer fields such as luxury watches and gold jewelry. Especially in the context of the return of overseas consumption and the upgrading of domestic consumption, the trend of marketization of luxury goods is more obvious, and the demand-side improvement trend in 2017 may continue. , high-quality leaders are expected to continue to benefit. Fiyta will continue to be the first to benefit from the recovery of the luxury watch market and is expected to usher in an inflection point in performance. Pay attention to Lao Fengxiang, who has excellent operating capabilities and reasonable valuation;
2. The fundamentals of the cotton spinning sector are gradually improving, focusing on Huafu Colored Textile and Lianfa Co., Ltd., the industry chain leaders with strong cost control and bargaining power, as well as Vosges Co., Ltd., which has gradually improved its fundamentals and benefited from the depreciation of the RMB;
3. Pay attention to “new consumption” and transformation investment opportunities under the trend of consumption upgrading: light luxury (Gliss), sports consumption (Aokang International, Guirenniao), and cosmetics industry chain integration (Qingdao King).
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