Textile Industry: Industry Profit Is Expected To Be Under Pressure In 2020, And Credit Risk Of Tail Enterprises Will Rise.

Downstream demand and internal and external difficulties, the textile industry in 2020 is expected to increase downward pressure on demand growth. In terms of domestic demand, domestic textile and apparel consumer products have been flat since the beginning of this year. In 2019, the growth of retail sales of clothing, shoes, hats, needles and textile products dropped to 3.3% percentage points over the same period of 1-9 months. Compared with other consumer categories, the growth rate of retail sales of clothing, shoes, hats and textile products decreased by 5.6 percentage points compared with that of other consumer categories. In terms of external demand, China's garment manufacturing industry shifted, while the peripheral low-cost garment producing countries increased demand for Chinese yarn and fabrics due to incomplete industrial chains. The upstream export of textile products was still acceptable, but the impact of tariff measures on the United States increased gradually, and the downstream products such as clothing had greater export pressure. It is expected that the downward trend of industrial demand growth in 2020 will be greater.

The transfer of textile capacity to overseas continues, industry concentration is improved, and the bargaining power of leading enterprises is expected to increase. In terms of domestic capacity expansion, fixed asset investment growth slowed sharply to -8.2% in the 1-9 month of 2019, and the capacity expansion was cautious. The trend of textile production capacity shifting to overseas continued, leading textile enterprises had obvious scale effect and technological advantages, and the pressure of survival of SMEs increased, and market share would further concentrate on leading companies, which would help leading enterprises to get the recognition of large brand customers and large-scale, stable and stable orders, and the bargaining power of leading enterprises would be enhanced.

Cotton prices are expected to run smoothly in the short term, but the medium and long term will still have some cost pressures on enterprises in the industry. In the short term, weak demand has led to a weak market demand for raw materials, and cotton prices are expected to remain stable in 2020. However, the gap between supply and demand of medium and long term cotton may continue to expand, and prices will have upward trend. Taking into account that the industry may rely more on imported cotton quotas, the number of quotas will have a greater impact on the market competitiveness and profitability of textile enterprises. The increase in cotton prices and the availability of import quotas may still form a cost pressure on textile enterprises.

Industry profitability is under pressure, cotton spinning enterprises have been frustrated. It is estimated that the pressure of industry profitability will continue in 2020, and the degree of debt operation will further improve, and the credit risk of enterprises with tail or weaker qualification will rise. In the first three quarters of 2019, the total operating revenue and total profit of textile enterprises above Designated Size slowed down year-on-year, the total profit decreased by 7.6% compared to the same period last year, and the number of entrepreneurs in the industry increased significantly. In 2019, 3436 enterprises in the industry lost 3436, an increase of 18.9% over the same period last year. The profits of the cotton textile industry in the sub sectors were significantly reduced, and the net profit fell to 17.08%. Under the background of low cotton prices, the cotton textile industry was hard to pick up, and the pressure on industry profitability in 2020 is expected to continue. The overall debt scale and asset liability ratio of Listed Companies in the industry increase, interest bearing debt is relatively high, the median of EBITDA interest protection is low, the private sector of the industry occupies a relatively high proportion, and the credit risk of the tail or less qualified enterprises will rise.