At the current time point, we believe that: 1) the clothing sector is under overall pressure due to the high base of 21q1 (shortage caused by the damage of overseas supply chain, and the high discount rate leads to the high net interest rate of 21q1); 2) the textile sector is under cost pressure due to the price rise of 21q4. The transmission cycle of downstream garment manufacturing price is about 1-2 quarters. We estimate that the second and third quarters are expected to meet the inflection point, The upstream yarn subdivision circuit is preferred. At the current time point, we mainly recommend the undervalued targets with high certainty in the performance of the first quarterly report:
(1) optimistic about the sustainability of the performance in the first half of the year, and the performance is expected to continue to exceed the expected target, recommend Bros Eastern Co.Ltd(601339) : in the medium and short term, on the one hand, 200000 ingots are expected to be put into production in 22 / 23 years; On the other hand, the company’s low-cost cotton inventory in Vietnam is expected to last until the first half of 22 years. In the long run, we put more emphasis on the company’s non cyclical growth logic, that is, the improvement of bargaining power brought by the increase of the company’s share. In addition, focus on the company’s growth with the expansion of Shenzhou, the largest customer.
(2) recommend Jinhong Fashion Group Co.Ltd(603518) : in the short term, 1) revenue side: the main business is expected to maintain double-digit growth in 22 years; 2) Expense side: the financial expense ratio is expected to improve significantly in 22 years, driving profit growth higher than revenue growth. In the medium and long term, 1) we estimate that the target market size of vgrass is 2.5-3.4 billion yuan and that of TW is 5-6 billion yuan; 2) Expense side: on the one hand, there is room for further improvement in financial expenses. On the other hand, with the improvement of store efficiency and the optimization of cost structure, there is room for 3-5pct improvement in sales expense rate.
(3) target with high-end track positioning and extension expansion space, recommend Baoxiniao Holding Co.Ltd(002154) : 1) the main brand increases the efforts to open stores in the central region by creating sports suits and broadening application scenarios, maintaining a growth rate of more than 15% higher than that of the industry; 2) Hazys: on the basis of high efficiency, the brand still has extension shop space; In addition, the brand still has the logic of expanding categories such as shoes, bags and golf series, which is expected to maintain an increase of more than 25% in the future; 3) BAONIAO is expected to maintain an increase of more than 10%, and usher in the improvement of net interest rate with the production of Hefei factory; 4) Small brands zhonglefeiye and kemiche are expected to maintain an increase of more than 35% and gradually contribute to profits.
Market review:
This week, the Shanghai Composite Index fell 4.00%, the gem index fell 3.03%, and the SW textile and garment sector fell 6.52%, underperforming the Shanghai Composite Index by 2.52pct and the gem index by 3.49pct. Among them, SW textile manufacturing fell 4.74%, and SW clothing and home textile fell 7.38%. At present, the PE of SW textile and garment industry is 14.01. This week, leisure performed best, with a decrease of 4.04%; Textile performance was the worst, with a decrease of 10.52%.
Market data tracking: China’s cotton price index rose 0.03% this week
As of March 11, China’s cotton 328 index was 22706 yuan / ton, up 0.03% this week; China’s imported cotton price index (1% tariff) was 20792 yuan / ton, down 1.98% this week. As of October, the closing price of the tariff index was 20.847% tons, down 30.841% for the week. On the whole, the price difference between inside and outside this week was 1914 yuan / ton, 425 yuan / ton more than last weekend.
According to USDA’s global cotton supply and demand balance in March, the total global cotton production in 2021 / 2022 is expected to be 26.095 million tons, down 66000 tons from the previous month, mainly from India; Consumer demand is expected to be 27.115 million tons, an increase of 24000 tons month on month; The ending inventory is expected to be 17.978 million tons, down 377000 tons month on month. China’s cotton forecasts for 2021 / 2022 are flat month on month.
Risk tips
Second outbreak of the epidemic; Fluctuation risk of raw materials; Systemic risk.
