Under the influence of the situation in Russia and Ukraine, cotton prices outside China fell from a high level: as of March 4, 2022, China’s cotton 328 price index and foreign cotook a price index were 22700 yuan / ton and 135.55 cents / pound respectively, up 2.22% and 8.40% respectively compared with the beginning of the year. However, since February, under the influence of the situation in Russia and Ukraine, cotton prices outside China have shown a downward trend. From February 7 to March 4, 2022, China’s cotton 328 price index and foreign cotlooka price index fell by 0.27% and 3.73% respectively. Overall, under the influence of the situation in Russia and Ukraine, the risk aversion is rising, the downstream demand of the cotton market may weaken, and there is a certain downward pressure on the cotton price. We still need to pay attention to the progress of the situation in Russia and Ukraine and the performance of terminal demand.
2022 government work report: the report points out that China’s GDP will reach 114 trillion yuan in 2021, with a year-on-year increase of 8.1%. It is expected that China’s GDP growth target in 2022 will be about 5.5%. Consumer prices will rise by 0.9% in 2021 and are expected to rise by about 3% in 2022. At the same time, the growth of residents’ income should basically keep pace with economic growth in 2022, and solidly promote common prosperity. In the tasks of the government in 2022, the report pointed out that we should promote consumption, expand domestic demand and promote the sustained recovery of consumption.
Market review: textile and garment sector: last week (February 28 to March 4, 2022), the Shanghai Composite Index, Shenzhen Component Index and Shanghai Shenzhen 300 index increased by – 0.11%, – 2.93% and – 1.68% respectively, and the textile and garment sector increased by 0.39%, ranking eighth among 31 Shenwan industries; Among them, the textile manufacturing sector rose 0.47%, and the clothing and home textile sector rose 1.00%. In the past month (from February 7, 2022 to March 4, 2022), the Shanghai Composite Index, Shenzhen Component Index and Shanghai Shenzhen 300 index increased by + 2.56%, – 2.31% and – 1.48% respectively, and the textile and garment sector increased by 4.31%, ranking 11th among the 31 Shenwan industries.
Cosmetics sector: the cosmetics sector fell 2.08% last week, underperforming the CSI 300 index by 0.40pct. The cosmetics sector rose 2.17% in the past month, outperforming the CSI 300 index by 3.64pct. Compared with 31 industries in Shenwan, the cosmetics sector ranked 25th in the past week and 17th in the past month.
Industry news: adidas announced that it had completed the external sale of its Reebok brand on February 28; Puma’s sales increased by 29.8% over the same period in fy19; In 2021, the sales volume of the high-end brand of belsdorf increased by 20.1% year-on-year; Lancome skin care products offline counter teller said that the price is expected to rise in April; China’s cutting-edge skin care brand Shanchuan has recently obtained millions of yuan of angel round financing; Li Jiaqi 38 greatly promoted the sales of the first pre-sale live broadcast to exceed 2.8 billion yuan, far exceeding the level of the same period last year.
Investment suggestions: 1) textile and garment industry: from the perspective of fundamentals, we maintain the early view that the performance of the industry will still be subject to terminal demand. We look forward to the introduction and implementation of measures to stabilize growth and boost consumption. From the market perspective, the recent war between Russia and Ukraine will promote the rise of risk aversion. It is suggested to pay attention to the related targets of undervalued and high dividend yield in the field of textile and clothing (see the attached table for details). In terms of stock subject matter, we have long recommended Anta sports, Li Ning and Tebu international in sports track; In the field of non sportswear, the consumption toughness of high-end category is strong. It is suggested to pay attention to the leaders of undervalued value of subdivided categories, including Luolai Lifestyle Technology Co.Ltd(002293) , Biem.L.Fdlkk Garment Co.Ltd(002832) , Baoxiniao Holding Co.Ltd(002154) . In terms of textile manufacturing, the performance in the past 21 years has gradually become clear, and Huali Industrial Group Company Limited(300979) , Shenzhou International have been recommended for a long time.
2) cosmetics industry: the cosmetics industry maintains the previous view. The general environment of intensified industry competition, increased layout of international brands, differentiated consumer demand and stricter industry supervision still exists. It is considered that Chinese brands still need to make continuous innovation and breakthrough in product strength. “38” e-commerce promotion is imminent. As one of the highlights of e-commerce in the first half of the year, we look forward to its sales performance and bring a certain boost to the performance. We believe that companies with large product accumulation and strong product strength will perform more prominently. We continue to recommend Proya Cosmetics Co.Ltd(603605) , Yunnan Botanee Bio-Technology Group Co.Ltd(300957) , etc.
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.
