Narrowing The Price Difference Of Cotton Textile Raw Materials Becomes A Long-Term Trend

raw material:

Domestic and overseas this month cotton The price difference has slightly expanded, but the "inventory/consumption" of domestic cotton is at a historical high, and the price difference between domestic and foreign cotton has narrowed to a long-term trend. The price of 328 grade cotton rose slightly by 0.01% this month, while the Cotbook: A index fell by 2.13%. The difference between domestic and foreign cotton prices (domestic cotton - foreign cotton, discount tax) expanded from 3690 yuan/ton to 3968 yuan/ton. The price difference slightly expanded this month, but the "inventory/consumption" of domestic cotton is as high as 1.27, while the "inventory/consumption" of overseas (other regions except China) is 0.52, and has continued to decline since the second half of 2012. Given the huge gap between domestic and foreign cotton "inventory/consumption", we believe that the cotton price difference will narrow to a long-term trend.

exit:

In March, textile and clothing exports fell by 11% partly due to the high base, and the operating rate showed a moderate recovery. March spin clothing The export volume was US $16.719 billion, down 11% year on year, compared with the textile industry in January and February Clothing export The rapid growth of 31.82% is in sharp contrast, partly due to the high export base in March 2011 and 2012 (the growth rate of textile and clothing exports in March 2011 and 2012 was 50.55% and 13.41% respectively). Although the export data in March was lower than expected, the operating rate of weaving enterprises showed a moderate and sustained recovery: in the first half of April 2013, the operating rate of weaving enterprises was 73.5%, higher than 68% in the same period of 2012.

domestic market demand:

In March, the clothing agency increased by 17.4% at zero, 8 percentage points higher than the previous month; One hundred clothing retailers increased 4.7%. Textile clothing in March 2013 shoes The zero amount of the Hat Knitting Club increased by 17.4% year on year, up 8 percentage points month on month. Compared with the flat domestic demand data in January and February, it improved significantly. Although it still decreased by 2 percentage points year on year, it was achieved against the background of the continuous decline of clothing CPI growth since 2012, indicating that sales began to resume growth as clothing prices stabilized. According to the clothing sales data of the national key 100 large-scale retail enterprises, the clothing retail volume in March increased by 4.7%, 2.7 percentage points higher than that in January and February, and also higher than the growth rate of 2% in 2012.

Market review:

Textile and clothing outperformed the market. This month, the Shanghai Composite Index fell by 4.72%, the Shenzhen Composite Index fell by 4.62%, and the clothing and home textile sector fell by 2.98%, outperforming the market. On the one hand, it is because of the market's brand Clothes & Accessories The fear that the orders in autumn and winter will be lower than expected and the annual report and the first quarter report has been released in the first two months. On the other hand, the retail volume data of 100 stores in March further showed that the clothing sales have recovered under the background of stable price increase. In March, exports were slightly lower than expected, and the textile manufacturing sector fell 3.46%, slightly underperforming the clothing and home textile sector.

Valuation:

Compared vertically and horizontally, the current valuation is relatively reasonable. At present, the static PE of textile and clothing sector is 18.75 times, and the premium rate of 12.86 times PE of all A-shares is 1.52 times, slightly higher than the average of 1.49 times since 2008. At present, the average PE of A-share brand clothing companies corresponding to EPS in 2013 is 15.58 times, higher than the average level of 13.41 times of Hong Kong shares, but lower than the average level of 18.16 times of overseas markets. In general, the current valuation level of A-share brand clothing is relatively reasonable by horizontal comparison. The key companies whose valuations are lower than the industry average are Aokang International (corresponding to 9.94 times in 2013), Baoxiniao (10.24 times PE), Septwolves (10.46 times), Jiumuwang (12.76 times) and Luolai Home Textile (13.77 times).

Investment suggestions:

　　(1) Textile manufacturing At present, the "inventory/consumption" of domestic cotton is up to 1.27, while the "inventory/consumption" of overseas (other regions except China) is 0.52, and it has continued to decline since the second half of 2012. With the huge gap between domestic and foreign cotton "inventory/consumption", the cotton price difference has narrowed to a long-term trend. It is suggested to focus on benefits in the next year Cotton price difference The reduced Lutai A (cotton spinning leader), Blum Oriental and Huafu Sifang (Sifang duopoly). (2) Brand clothing: under the background of generally taking distribution as the main sales mode, we believe that the current order of brand clothing enterprises will be lower than expected, and the inventory at the company level will be high or lagged behind. At present, the leading men's clothing companies are valued at 10-12 times, which has a high margin of safety. If the retail volume of terminal clothing continues to rise, companies with self support as the main sales mode (such as Lucie Shares, Kanudi Road) It is expected to take the lead in getting out of the low performance.

Risk warning:

The domestic and foreign economic recovery was lower than expected, the RMB appreciated, channel costs rose, and terminal inventory was high.