Clothing consumption is “high before low”, and the textile industry is “mixed”. In 2021, affected by the slowdown of overall consumption growth and the repeated impact of the epidemic, the consumption growth of the clothing industry showed “high first and then low”. In the second half of the year, the growth of social zero clothing retail sales and the income of listed companies slowed down. In 2021, the prosperity of overseas consumption was high, and the global epidemic spread. Orders from Southeast Asia and other regions returned to China, and the year-on-year growth rate of garment export increased significantly. However, due to the price rise of raw materials such as upstream cotton and chemical fiber, the sea freight increased significantly, and the profit end of textile enterprises was facing certain pressure.
The clothing industry is cyclical, and textile pays attention to scale and R & D. In the long run, the garment industry has entered a low-speed growth stage, with excess supply and sufficient competition. Since 2017, under the demand fluctuation, the performance and stock price of the clothing company fluctuated periodically around the inventory. At the end of the third quarter of 2021, the company’s inventory was at an all-time high, and there was great pressure on revenue growth under the condition of weak demand. We believe that in the long run, garment enterprises need to upgrade their business model, provide more competitive and differentiated products, open stores and expand on this basis, and break the inventory cycle. China’s labor cost advantage in the textile sector has gradually disappeared, and the industry has entered a recession. In the future, leading companies with scale advantages and “specialized, special and new” companies with R & D advantages will continue to grow.
In the new year, focus on performance reversal and specializing in special new investment opportunities. Looking forward to 2022, we believe that: 1) the garment industry as a whole is in the early stage of destocking, and listed companies have great growth pressure. In 2022, we will pay attention to whether there are performance improvement opportunities after digesting the inventory pressure in the second half of the year. In addition, after years of adjustment, some companies cooperate with external consulting companies to build high-quality products and brands, and the performance reversal opportunities deserve special attention. 2) The downstream demand of the textile sector is expected to be under overall pressure in 2022, but the prosperity of some subdivided industries such as outdoor and automobile leather is expected to be high. The leaders of relevant industries have the advantages of R & D, technology and production, with strong certainty of order growth. In addition, the prices of upstream raw materials and shipping are expected to fall, and the performance growth elasticity is large. It is recommended to focus on it.
Investment suggestion: in 2021, the overall performance of the textile and garment sector is relatively weak, and the industry valuation is at the historical average level. In 2022, we suggest to pay attention to: 1) recommend Zhejiang Aokang Shoes Co.Ltd(603001) for companies in the leather shoes industry that cooperate with Junzhi consulting and whose performance is expected to reverse, and the domestic brand of leather shoes is expected to rise; Pay attention to the performance reversal opportunities of high-quality companies after inventory digestion in the second half of the year, and it is suggested to pay attention to Anta sports, Li Ning and Bosideng; 2) In the textile sector, it is recommended to pay attention to specialized and special new listed companies with strong R & D advantages and profitability, clear long-term growth logic, and the valuation is expected to improve after full market awareness. It is recommended that Mingxin Automotive Leather Co.Ltd(605068) , Zhejiang Huasheng Technology Co.Ltd(605180) , Zhongwang Fabric Co.Ltd(605003) etc; The prosperity of leading textile enterprises is high, but they are also fully expected. It is recommended to pay attention to the investment opportunities brought by the improvement of performance growth after the improvement of the epidemic situation in Vietnam. It is recommended to Huali Industrial Group Company Limited(300979) and Shenzhou International.
Risk factors: the impact of covid-19 pneumonia epidemic exceeded expectations, the global economic growth declined significantly, and China’s clothing consumption remained depressed.
