Textile, Footwear And Clothing Enterprises Are Optimistic About Brand Retail As A Whole

Clothing in 2011 industry The growth rate is more optimistic, and the cost pressure under the inflation situation is less, especially the parity clothing Stronger resistance to inflation.

Textile and clothing are divided into two major sectors: processing and manufacturing and brand retail brand Retail sector growth. Compared with clothing, home textile, shoes and other sub industries, we are most optimistic about the "clothing sub industry". The logic is that the growth of clothing sub industry in 2011 should be more optimistic, and the cost pressure faced by inflation is less, especially the affordable clothing has a stronger resistance to inflation.

Clothing companies have obvious advantages in the competitive landscape, and their business model is more mature, so their performance growth is relatively certain. In the processing and manufacturing sector, the late performance is under pressure due to the high price of raw materials.

Processing and manufacturing:

The price of raw materials falls and the plate is under pressure

At present, the price of cotton based raw materials has reached a new high in recent years due to the fund speculation under the loose monetary policy, and the increase has exceeded the enterprise's affordable range. No matter what the future trend is, it has seriously affected the production plan, inventory management and profitability of the enterprise. At the same time, orders in advance may lead to insufficient orders in the future, and the boom peak of the sector may face a turning point.

We judge that the export growth of the industry will maintain about 10% in 2011, but the high raw material prices have deviated from the fundamentals, and the boom peak of the processing and manufacturing sector may face a turning point. In particular, the first half of 2011 is the most sensitive, and processing and manufacturing enterprises may face reshuffle again.

From the perspective of enterprise operation and profitability, the adjustment has begun

Production plan: The price of downstream cotton textile products has achieved a high growth before, but now it has not kept pace with the increase of cotton prices. Most small and medium-sized cotton textile enterprises have been afraid to quote or accept large and long orders, and their production plans have been affected.

Inventory management: In 2009, enterprises kept relatively high inventory of low price raw materials and finished products, while at present, the inventory level of most enterprises is not high. It is estimated that the inventory of large cotton enterprises such as Lutai is only enough to support the first quarter of 2011. With the cotton price level of nearly 30000 yuan/ton, it is difficult for enterprises to reduce risk exposure through inventory management.

Profitability: The current cotton price level, whether rising or falling, has a negative impact on the profit growth of enterprises. If cotton prices continue to rise, enterprises will have greater pressure to pass on costs; If the cotton price falls, the product price of the enterprise in 2011 will be lower than that in 2010, which will affect the income and profit growth. Brand retail:

Overall situation Ideal parity clothing more inflation

The rapid growth of China's textile and apparel consumption has formed the basis for our long-term optimistic brand retail sector. As far as 2011 is concerned, we expect that the growth of domestic textile and apparel consumption will still maintain 25%.

First, the logic of long-term high growth cycle of brand clothing consumption has not changed, and the growth rate of industry consumption will still maintain 2-3 times of GDP growth.

Second, it is estimated that the current order growth of Hong Kong stock and A-share listed brand apparel companies in spring/summer 2011 will exceed expectations, with the average order growth reaching more than 20%, and some companies reaching more than 30% or even higher, which shows that terminal franchisees are very optimistic about the intuitive feelings of later consumption, and form the basis for revenue growth in 2011.

Third, each brand company has constantly explored deep needs through new brand series, novel designs, etc., which has significantly driven sales growth and price increase.

We are optimistic about the growth of brand retail sector as a whole, but compared with clothing, home textile, shoes and other sub industries, we are most optimistic about the "clothing sub industry". The logic is that the growth of clothing sub industry is expected to be more optimistic in 2011, and the cost pressure faced by inflation is less, especially the inflation resistance of flat priced clothing is stronger.

First, in terms of raw material costs, the pressure of soaring cotton prices on clothing is far less than that on home textile products. Cotton prices have risen by 80% since the beginning of 2010. It is theoretically estimated that clothing and home textile terminal prices need to increase by 13% and 19% to pass on costs. As the price increase of clothing is less than that of home textile products, the demand for consumers' purchasing power in the later period is also lower than that of home textile products.

Secondly, in terms of rent, compared with home textiles and shoes, the proportion of sales in specialty stores in the clothing industry is higher than that in department stores, and the retail channel is more depressed, so the rent pressure is small.

Finally, the low price clothing in clothing is more affordable to inflation. Affordable clothing is more of a necessity, rigid. And more importantly, the affordable clothing itself is the product with the least cost pressure and the lowest price increase in the industry. The affordable clothing channels are more concentrated in the third and fourth tier markets, and the rent share and upward pressure are significantly lower than other products.

At the same time, the growth of clothing companies is relatively certain. Compared with home textile companies, the growth of clothing companies is not affected by industry cycle factors. The main driving factor of clothing consumption is the level of residents' income. At least 20% of the income of the home textile industry is driven by real estate, which has become an uncertain factor for the growth of home textile companies.

Compared with shoe companies, garment companies have more obvious advantages in the industry competition pattern. In the clothing sub industry, outdoor products and leisure clothes have not yet formed a stable competitive pattern. At present, Seven Wolves (002029. SZ), Meibang Clothing (002269, Guba) (002269. SZ) and Pathfinder (300005, Guba) (300005. SZ) are all the leading players in the sub industry, with strong competitive advantages in their respective sub industries; The competition pattern of the formal clothing sub industry is stable. Youngor (600177. SH) and Baoxiniao (002154. SZ) have leading competitive advantages in middle and high-end products respectively. Looking at the footwear sub industry, although the pattern is stable, the dominance of Belle has led to other companies being at a competitive disadvantage.

High quality clothing companies currently have a mature business model, with obvious ability to resist risks. The clothing sub industry has developed relatively early, and its experience in brand, channel, supply chain and order meeting is being learned by home textile companies. After fierce competition, the clothing companies that stand out at present have obvious advantages in a certain link.

For example, the channel expansion and management capabilities of Septwolves, the collaboration capabilities of the overall supply chain of Meibang Garments, and the refined brand management of Baoxiniao. It is the above mature business model that makes the performance growth of clothing companies in the financial crisis more stable than that of home textile and footwear companies. Industry rating and investment strategy

Maintain the brand retail sector's "stronger than the market" rating, and the processing and manufacturing sector's "neutral" rating.

We are optimistic about the high growth of the brand retail sector, especially the clothing sub industry. Recommend "brand and channel operation mature" Septwolves and Baoxiniao, "affordable clothing, improve beyond expectations" Meibang Clothing and Shinur (002485, Guba) (002485. SZ), "performance explosion growth" Souyute (002503, Guba) (002503. SZ) and Pathfinder. In the processing and manufacturing sector, Jiangnan High Fiber (600527. SH), which has a low export proportion and benefits from the growth of domestic sanitary product consumption, is recommended.