Textile And Garment Industry: Fully Optimistic About Domestic Leading Brands And Increasing Market Share

Key points of investment

Xinjiang cotton production accounts for about 60% of China's total cotton consumption

First of all, in terms of cotton output, Xinjiang's cotton output will total 5.16 million tons in 2020, accounting for 87% of the national cotton production, equivalent to 62% of the national cotton consumption. At the same time, China has less than 10% (about 2 million tons) of yarn imports every year. Therefore, in general, Xinjiang's cotton production is basically equivalent to 60% of China's total annual cotton consumption.

China's domestic demand and exports from Europe and the United States and other regions are enough to digest Xinjiang cotton

China's textile and clothing exports to Europe and the United States account for about 20% - 25% of the total output value. From 17 to 19, China's export volume of textile, clothing and clothing to the world has been maintained at around 2 trillion yuan, of which the export volume to Europe, the United States and the United States is about 350 billion yuan. At the same time, according to Euromonitor's data, China's total retail sales of clothing in 19 years was about 2.6 trillion. We estimate that the 700 billion orders exported to Europe and the United States account for about 15% of China's textile and garment output value. Therefore, even if the demand for this part is damaged, the surplus domestic demand plus the demand from other overseas regions also accounts for more than 85% of China's total textile output value, which is enough to digest Xinjiang cotton.

The Xinjiang incident involves the leading share of brands in China, which is expected to bring opportunities for Chinese brands

The overseas brands involved in the Xinjiang incident account for half of China's top ten clothing group sales. The companies (brands) involved in the Xinjiang cotton incident include Nike, Adidas, UNIQLO, INDITEX (Zara), HM, only / VeroModa / Jack Jones, crocodile, PVH (Tommy), etc., and these brands have a high market share in China. According to Euromonitor, Nike (the first), Adidas (the second), fast retailing (the fourth), Ling Zhi (seventh) and INDITEX (the tenth) have accounted for half of China's shoe and clothing retail market share in the past 20 years. Under the obvious influence of these brands, China's sportswear leaders Anta (the group's market share ranks the third in the total shoes and clothing retail sales), Li Ning (the group's market share ranks eighth in the total shoes and clothing retail sales) are expected to further challenge Nike and ADI's market share in China; at the same time, leisure wear leaders bosden (11th), taipingniao (14th), SEMA apparel (5th) and Haihai (5th) Lanzhijia (sixth) is expected to challenge the overseas brands led by UNIQLO and Ling Zhi; in the medium and high-end clothing, the Chinese brands led by bienleifen and Dishu fashion are also expected to continue to grow at a high speed.

Fully optimistic about investment opportunities of leading brands

We believe that for the clothing industry, (1) in terms of product strength, the product quality of China group is not weaker than that of overseas brands; (2) in terms of channel management ability, with the continuous improvement of digital management ability, the operation ability of Chinese companies has been rapidly improved in recent years. (3) On the more important cultural level, we can see that many rare star resources monopolized by overseas brands have begun to terminate contracts with these brands. The brand influence of overseas brands involved is greatly affected in China. We believe that this will bring important opportunities for the increase of market share of Chinese brands. At the same time, domestic brands responded to the use of Xinjiang cotton, which also carried out large-scale advertising marketing for the leading domestic brands.

We recommend: (1) Anta sports and Li Ning, the two leading players in the track of sportswear, have gradually possessed the strength to compete with overseas brands. Driven by the excellent annual report, we are firmly optimistic about the development prospects of the two companies; (2) in terms of mass clothing, bosden, which is optimistic about the continuous improvement of brand strength, taipingniao, which is constantly releasing the dividend of product power, and Senma clothing and hailanzhi, the leading brands At the same time, in the field of home textiles and daily necessities, we believe that the leaders such as rolai life, fuana and steady medical are also expected to benefit.