Textile And Clothing Are Different From &Nbsp To &Nbsp; Cotton Demand Will Be The Main Line In The Second Half Of The Year.

First half year

The export pulling effect has gradually weakened, and the listed textile companies' share price has increased their sensitivity to cotton price fall.

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Textile looks at cotton prices, clothing looks at the impact of external factors on demand and valuation level.

At present, cotton price has 20% downside compared with the state's purchase and storage price.

In terms of clothing, in view of the 2011 spring, summer, autumn and winter orders will be ideal, this year's income can generally be locked.

But we should be alert to the slowdown in the second half of the year and the impact of the CPI downturn on consumption growth.

The industry is slightly outperforming the big market, and textile and clothing are different.

In the first half of 2011, the textile and garment sector fell 4.9%, slightly outperforming the market, ranking ninth of the 24 industries.

In particular, the textile sector also achieved a positive return of 0.76%, while the performance of the clothing sector was inferior. The first half of the year fell by 9.02%, which is weaker than the market trend.

From our list of rising stocks this year, the top ranking is basically textile stocks, most of which are related to themes.

However, from the textile stocks we focused on, the yield in the first half of the year was not ideal. Besides the fact that Lu Tai had recorded 15% gains in the first half of the year because of the expansion of high-grade dyed fabrics, other textile stocks fell.

From the two aspects of demand side and cost side, we can find out: in the 1-2 month, when export data were good, cotton prices also rose, white horse textile stocks only increased slightly, but exported well in 3-4 months, but when the cotton price plummeted, most white horse textile stocks began to fall rapidly.

We think there are two logic behind:

Cotton textile enterprises' "current price plus pricing" mode has led to a rise in cotton prices for textile enterprises, and the drop is bad.

Although the price of cotton rose from 27516 yuan in the early January to a record high of 31241 yuan in March, cotton prices had risen sharply in the second half of last year. The value of the whole textile stocks reached a high level in early 11, for example, the valuation of Huafu color spinning reached 17 times. For the cyclical stock, the valuation was basically reasonable, so even if the cotton price continued to rise 13.5%, the textile white horse stock would not form a larger scale increase.

The increase in the price of products caused by the sharp fluctuations in raw material prices has led to the increasing contribution of price factors to export growth, and it is difficult to grasp the growth of real export volume.

Therefore, this year's 1-4 month good export data, cotton prices can not be ignored.

We found that although the amount of cotton yarn exports increased, but the tonnage decreased, so the real terminal demand was shrinking, so it was even worse for the textile stocks with smaller gross margins.

The first half of the clothing sector was flat, men's clothing fell 11%, casual wear fell 14.8%, the only better performance was the home textile plate. After the announcement of a quarterly and order meeting in March, three major home textile stocks rose, and Rose Rose 20%.

From a fundamental point of view, the clothing industry in the first half of the year is more prominent, especially in March began to face the double price of cotton prices and terminal price increases, stock prices have not been captured. We believe that the main reason is that the valuation is not much room for growth relative to growth.

Under the background of CPI rising, the price increase is easy to be accepted by the consumers. But by the time of the inflation fall stage, the price increase will be difficult to continue, and at present, the international brand is also sinking in China.

Therefore, we believe that the traditional clothing companies are relatively stable because of their size constraints and some sub sectors are relatively stable, so there is little room to raise their valuations.

Cotton demand will be the main line in the second half of the year.

Cotton's basic tension has been alleviated and cotton prices will remain low.

The prediction data of China's cotton sowing area and yield per unit area released by USDA of the US Department of agriculture, because the cotton is the spring harvest autumn harvest, the data in May, especially the sowing data, should be more accurate.

After the end of the sowing season, USDA significantly raised the area of cotton sowing in May, from 5 million 100 thousand hectares projected to 5 million 400 thousand hectares in the beginning of the year, increasing by 5.8%. Taking into account the weather conditions and recent growth, the prediction of unit yield increased from 1.3% kg / ha to 1306 kg / ha at the beginning of the year, with an increase of 1.3%.

It is estimated that the increase in May will lead to a 7% increase in cotton production this year.

Besides, we think that the inventory consumption ratio will also rebound.

In the 09 financial crisis, inventory consumption rose all the way. Until February, with the economic recovery, the inventory consumption ratio declined rapidly, and in May this year, it reached a new low of 25%.

We believe that this situation will be eased in the second half of the year.

First of all, this year cotton growers will increase their willingness to grow, and cotton production will rise significantly compared with last year. Secondly, from the demand side, on the one hand, high price cotton will inhibit part of the demand. On the other hand, in the second half of the year, the overseas economy will decline in the case of policy withdrawal, and the export itself will be inhibited. In the second half of the year, we will have a gradual rebound in the ratio of two to one.

In the second half of the year, the overall clothing plate is good, given that most of the brand clothing is used in the form of order, this year's sales are basically in the spring and summer and autumn and winter.

In addition, the cotton price fell to solve the cost side pressure, overall, the performance of the newspaper will be good performance, net profit growth will exceed the growth of business revenue at a high level.

But the industry is still facing uncertainty.

Economic inflation will affect consumption, and the growth rate of clothing consumption will decline in the fall of CPI, which will lag behind the turning point of economic slowdown.

The decline in the growth of clothing consumption will affect the change of the operating income of listed companies, and thus affect the performance change, so that there may be a downward trend.

Focus on high growth small cap stocks

For the textile industry, we believe that the profit model of the current "price plus pricing" method has resulted in the loss of gross profit margins of textile enterprises when cotton prices fall.

If the production is maintained in the first quarter of this year, there may be some procurement and a neutral rating of the textile sector.

For the clothing industry, we are concerned about the "increase" of the company, that is, the growth of business revenue is not simply caused by the increase in price, proving that its own growth has not reached the bottleneck stage, and the impact of the second half of the year on consumption growth is also smaller.

"Volume increase" has two clues, 1) the industry is still growing rapidly; 2) the company's own scale is still small, there are still large growth space varieties.

We are optimistic about the two companies in the second half of the year.

We think that the time to market will reflect the maturity of an industry to a certain extent. With the appearance of men's clothing on behalf of YOUNGOR and Dayang creation, before 2000, the listing of casual wear appeared in 08 years, and the listing of home textiles appeared in 09 or 10 years. At present, the growth of men's clothing industry is 15%, and casual wear is also around 15%.

Home textile 20%, so the home textile industry is still the fastest growing sub industry, and search special enough "small", in improving the coverage of the store has great room for improvement.