Textile And Garment Industry: Downstream Terminal Continues To Recover, Upstream Textile Enterprises Return Orders

Organization: Tianfeng securities

Rating: stronger than the market

Upstream: Indian textile orders transferred to China, accelerating the recovery of upstream textile enterprises

Recently, due to the severe epidemic situation in India, textile industry stopped work, and a large number of orders flowed out to China for production, and the upstream textile manufacturing industry accelerated its recovery. In terms of orders, we mainly focus on the towel industry in China

1) China has the whole textile industry chain, and has strong control over the epidemic situation. The resumption of work and production of each factory is carried out in an orderly manner and can undertake large quantities of textile orders;

2) the domestic cotton price is relatively low, and the cost advantage of raw materials is obvious.

We believe that the transfer of Indian orders to China is good for the rapid recovery of textile manufacturing industry in the short term.

In the first half of the year, due to the impact of the epidemic situation, the upstream textile enterprises were affected by the delay in resuming production and the loss of orders, and their performance declined significantly; in the second half of the year, with the gradual recovery of downstream terminal demand, the order and capacity utilization rate continued to recover; superimposed on the transfer of Indian orders to China, the textile enterprises' production capacity was accelerated.

From the recovery of domestic enterprises, according to our tracking, 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, it is expected that the overall capacity and order situation will continue to recover.

Downstream: brand terminal continues to recover, cold winter is good for winter clothing sales, Q4 plate is expected to fully recover.

From the perspective of downstream brands, offline terminals continued to recover; from the perspective of online channels, all brands continued to maintain a relatively rapid growth, and the data of the National Day golden week were brilliant, opening the Q4 winter clothing sales peak season.

At the same time, due to the influence of La Nina phenomenon, China's winter 2020-2021 is expected to be cold winter. From the perspective of the National Day golden week, the temperature of the whole country dropped by 4 ~ 5 ℃, and the temperature in the northern region dropped more obviously, which was good for the sales of down jacket in winter.

We believe that the base number of 19q4 is relatively low due to the influence of warm winter; the cold winter catalysis of 2020q4, and the winter clothing sales are started in some areas in advance; meanwhile, the Spring Festival of 2020-2021 is in the middle of February, which is later than the Spring Festival in 2019-2020, and the winter clothing sales season is lengthened. The superposition of multiple factors is beneficial to the winter sales of the brand,

We believe that Q4 brands are expected to continue to recover. We believe that the current valuation of the entire textile and clothing sector is low, but Q4 plate is expected to recover in an all-round way. We still recommend the high-quality standard in the current plate.

Upstream textile manufacturing: [Shenzhou International], [Jiansheng group], [Kute intelligent]

Downstream brand end: [bosden], [Li Ning], [Anta Sports], [Antarctic e-commerce], [kairun shares], [taipingniao], [robust medical].

Risk tips: the transfer of orders from India to China is a short-term factor. Attention should be paid to the return of follow-up orders to India; repeated epidemic situation; weak terminal consumption.