International cosmetics leaders have successively disclosed financial reports: L’Oreal: in 2021, L’Oreal’s high-grade cosmetics increased by 20.9% year-on-year, significantly faster than the growth rate of mass cosmetics by 5.6%, and L’Oreal achieved double-digit growth in the Chinese market in 2021; Shiseido: in 2021, the sales volume of Shiseido in China increased by 16.5% year-on-year; Coty Coty: in the second quarter of fiscal year 2022, the Chinese market achieved double-digit growth year-on-year. The growth rate of high-end beauty terminal sales in the Chinese market is seven times that of the overall level of the high-end beauty market.
USDA monthly report on cotton production, sales and inventory in February 2022: according to the forecast of USDA monthly report in February 2022, compared with January 2022, the global cotton production forecast in 2021 / 22 is reduced by 175000 tons, the consumption is increased by 40000 tons, the import is reduced by 26000 tons, the export is reduced by 25000 tons, and the ending inventory is reduced by 153000 tons. Compared with January 2022, the forecast of China’s cotton import volume and ending inventory in 2021 / 22 is reduced by 55000 tons and 60000 tons respectively, and the forecast of output and consumption remains unchanged.
Market review: textile and garment sector: last week (from February 7 to February 11, 2022), the Shanghai Composite Index, Shenzhen Component Index and Shanghai Shenzhen 300 index increased by + 3.02%, – 0.78% and + 0.82% respectively, and the textile and garment sector increased by 2.67%, ranking 19th among 31 Shenwan industries; Among them, the textile manufacturing sector rose 2.12%, and the clothing and home textile sector rose 2.34%. In the past month (from January 12, 2022 to February 11, 2022), the Shanghai Composite Index, Shenzhen Component Index and Shanghai Shenzhen 300 index increased by – 2.93%, – 7.02% and – 4.09% respectively, and the textile and garment sector fell 6.78%, ranking 22nd among the 31 Shenwan industries.
Cosmetics sector: the cosmetics sector fell 5.45% last week, underperforming the CSI 300 index by 6.28pct. The cosmetics sector fell 14.33% in the past month, underperforming the Shanghai and Shenzhen 300 index by 10.24pct. Compared with the 31 industries of Shenwan, the cosmetics sector ranked 31st in the past week and 31st in the past month.
Industry news: Levi’s Asia Pacific market revenue in the fourth quarter of fiscal year 2022 increased by 16.3% year-on-year; In the third quarter of fiscal year 2022, VF Weifu’s sales in the Chinese market fell by 12% year-on-year; Canada geese, in the third quarter of fiscal 2022, Chinese mainland DTC and e-commerce business increased 35.1% and 60% respectively. Guangzhou Huanya cosmetics technology Co., Ltd. will sprint for IPO.
Investment suggestions: 1) textile and garment industry: from the perspective of fundamentals, we maintain the previous view. It is expected that the general environment of terminal retail demand is still weak. However, due to the influence of the advance of the Spring Festival in 2022, the retail data of that month is expected to perform better year-on-year, which is more objective from January to February. The recent Winter Olympic Games have brought about the catalysis of relevant conceptual targets. We continue to recommend the brand targets related to sportswear related to the continued prosperity of sports track and Winter Olympic Games, and Biem.L.Fdlkk Garment Co.Ltd(002832) of Anta sports, Li Ning, Tebu international and high-end positioning; In the field of non sportswear, it is suggested to pay attention to the leaders of undervalued sub categories, including home textile Luolai Lifestyle Technology Co.Ltd(002293) and men’s wear Baoxiniao Holding Co.Ltd(002154) (hazzys, a sports fashion brand under its control). Textile manufacturing continues to recommend Shenzhou International, Huali Industrial Group Company Limited(300979) , which has strong growth sustainability and a solid position as a high-quality head manufacturer. In addition, in the recent style adjustment, it is suggested to pay attention to textile and clothing targets with undervalued value, high dividend and relatively stable cash flow, including China LiLang (see the attached table for details).
2) cosmetics industry: the cosmetics industry maintains the previous view, and the short-term data is expected to be relatively flat. From the recent financial reports, international high-end brands have a relative advantage in brand strength, R & D and other comprehensive strength. Under the background that the industrial competition pattern is still severe and the industrial dividend and flow dividend are gradually fading, more attention is paid to the building of individual competitiveness of enterprises. We continue to recommend Proya Cosmetics Co.Ltd(603605) which actively improves the product power, has strong operation ability, has formed a clear strategic layout of multiple large single product series, multiple categories and multiple brands, has high performance growth, has a stable position as a subdivision leader, actively expands new categories and effects, and actively increases brand investment to improve influence.
Risk tip: the macroeconomic growth rate is down, and the terminal consumption is weak due to repeated epidemics or extreme weather, which affects the consumption demand of clothing, cosmetics and other products; The intensification of industry competition and the price war of foreign leading brands will have an adverse impact on China’s benchmark brands; E-commerce platform traffic growth slowed down and traffic costs increased.
