Textile Clothing Warming Signal Is Obvious, Four Seasons Hope To Resume Positive Growth

The year 2020 is a cold winter for the textile and garment industry. In the first half of the year, 90% of the clothing listed companies suffered from a decline in performance, which was rarely seen in history.

For example, the leisure clothing leader SEMAR clothing (002563-cn) was also hard to escape. In the first half of the year, net profit plummeted by 97% and 750 stores were closed. In addition, it also issued an announcement to sell French children's wear loss making subsidiaries to reduce operational risks.

Entering the second half of the year, although the clothing industry has not been able to make the best of it, it seems to have seen the dawn.

Exports rose for the first time in August and orders exploded

From January to July, China's clothing export experienced a recession, and the export volume began to rebound in August, and the cold wind of clothing industry gradually dispersed.

According to the national development and Reform Commission, in August this year, clothing exports increased by 3.23% year-on-year, which was the first time that a positive monthly growth was resumed after seven months of negative growth in the year. In addition, according to the Statistics Bureau, the year-on-year growth rate of clothing, shoes, hats, needles and textiles of Enterprises above the quota has recovered from - 34.8% in March to 4.2% in August.

According to the tracking of Tianfeng securities, the capacity utilization rate of upstream enterprises continued to recover in the third quarter, and the orders were in good condition. After entering the peak season in the fourth quarter, the overall capacity and order situation are expected to continue to recover.

From this point of view, the clothing industry has entered the traditional "golden nine silver ten" sales peak season. In addition to the steady recovery of domestic economy driving demand growth and the arrival of the traditional "golden September 10 Silver" season, the recent transfer of textile orders from abroad to China is another major factor.

India is the world's largest cotton producer and the world's largest jute producer. Data show that the size of India's textile and clothing market in 2019 will reach 250 billion US dollars (about 1.68 trillion yuan), and the textile industry accounts for about 15% of India's total export revenue. However, the current epidemic situation in India is hard to be optimistic. As of 11:30 on October 16, Beijing time, the total number of confirmed cases in India has reached 7.307100, ranking the second in the world. The deterioration of the epidemic situation has caused heavy damage to India's textile industry and made delivery difficult.

As another big textile and garment country, European and American retailers transfer many orders originally produced in India to China in order to ensure continuous supply. According to the estimated data, the order schedule of some clothing manufacturing in China has reached may next year, and the export of textiles in the next few months is expected to maintain the current hot phenomenon.

Affected by this, since October, a shares of textile manufacturing plate share prices have soared. According to the data of tonghuashun, the textile manufacturing index of a share rose by 13.64% from October 9 to October 16, among which the stock prices of Blum Oriental (601339-cn) and Jujie micro fiber (300819-cn) continued to soar.

What signal upstream, follow the trend?

Since October, the price of raw materials such as polyester and cotton has entered the upstream market, leading to the shortage of raw materials such as polyester and cotton.

At the beginning of September, the price of dyestuff rose sharply, and the price of disperse dyestuff has been raised comprehensively. Take the disperse black ect 300% dye as an example, the price of this product has been increased by 36% in recent two months.

In terms of cotton price index, according to wind data, from October 6 to October 16, China's cotton price index 328 soared by 11.9% to 14421 yuan / ton, a new high since July last year.

In addition, the polyester POY price index hit the bottom and rebounded at the end of September. On October 15, the polyester POY price index was 5450 yuan / ton, up 7.28% compared with September 30.

The fundamentals of upstream raw materials represent the barometer of textile and garment industry. In the case that the rise of upstream raw materials leads to the rise of production costs of fabric manufacturers, domestic Longfeng cloth industry, qiongsheng cloth company, Shiyi Changfeng cloth company, hengwang cloth company and other industry leaders can only rise in the face of the shortage of supply and cost. For example, Longfeng cloth company issued a price increase notice on October 11, which indicated that the unit price of some products was increased on October 12 to alleviate the pressure of production cost due to the price rise of some raw materials.

The prices of raw materials and fabrics in the upstream are rising. For textile and garment manufacturers, the price of raw materials is variable, but the price of finished clothing is not that the price can rise. In the era of clothing price competition, consumers who want to sell clothing in a more competitive fashion industry will be more competitive. According to the data of China report hall, from February to July this year, the retail price index of clothing, shoes and hats decreased from 100.4 to 99.22, a year-on-year decline of 1.2%. In the case of rising raw material prices driving up production costs, the decline of textile and garment terminal prices undoubtedly brings profit pressure to related enterprises.

The net profit of most enterprises in the third quarter is expected to fall, and it is expected to rise in the fourth quarter

After the outbreak in the first half of the year, textile and garment enterprises still failed to usher in sunshine in the third quarter of this year, and the cold air did not disperse.

At present, there are 83 A-share textile and garment enterprises, among which 26 enterprises have issued the third quarter performance forecast. Judging from the performance forecast of these enterprises, the net profit of most enterprises is expected to record a sharp decline. Among the following 26 enterprises, less than 5 enterprises, such as baoxiniao (002154-cn) and Bangjie Co., Ltd. (002634-cn), are expected to achieve positive growth in net profit in the third quarter.

However, the three leading enterprises in the clothing industry, namely, semma apparel, septenaeus (002029-cn) and Meibang clothing (002269-cn), are hard to meet the sluggish demand of the industry, and their net profits are expected to decline sharply in the third quarter. In the performance forecast, the words "due to the impact of Xinguan epidemic, the market demand is weak, and the terminal sales are greatly affected". The net profit of most other enterprises also decreased to varying degrees, and even suffered losses. Therefore, the forecast rate of textile and garment industry in the third quarter of A-share industry was the highest, exceeding 70%.

After three cold seasons, the textile and clothing industry is expected to "reverse the extreme" in the fourth quarter. In addition to the above mentioned Indian textile orders returning to China and the arrival of the traditional consumption peak season, the demand from the domestic "double 11 Shopping Festival" has also increased the consumption market increment. At the same time, the cold winter expectation under the "La Nina" climate also increases the market's expectation of winter clothing demand. In the first ten days of October, snow appeared in many places in China, including Henan, Shaanxi, Shanxi, Heilongjiang, etc., and it entered the winter ahead of schedule. This year, China will probably usher in a cold winter. The demand for down jacket, clothing and home textiles with cold resistant properties of quilt core and cotton and hemp raw materials in the upstream are expected to usher in rapid growth in the fourth quarter, driving the demand of the textile and clothing market.

Therefore, it is expected that the multiple factors of positive brand growth in the winter are expected to recover.