The Zhitong Finance app learned that Guangfa Securities published a research report saying,The textile manufacturing dilemma has been reversed, and the valuation and stock prices of leading companies are expected to be repaired.First, 2024, and the first half of the year in particular, will correspond to a low base for the first half of this year. Overseas brands will have higher product inventories due to supply chain instability and uncertainty in the global economic situation. Beginning in the second half of 2022, they will gradually adjust inventories and reduce orders, and will continue until the first half of 2024 and even the first three quarters. Second, overseas brand inventories have been removed smoothly, normal procurement is expected to resume in the future, downstream demand is expected to pick up, and the capacity utilization rate of leading companies is expected to pick up. Third, the price of raw materials has steadily rebounded, and leading companies are increasingly using cost addition pricing, which is expected to be beneficial. Finally, most leading companies' stock prices are at the lower end of the historical range.

▍ The main views of GF Securities are as follows:

The textile manufacturing dilemma has been reversed, and the valuation and stock prices of leading companies are expected to recover

First, 2024, and the first half of the year in particular, will correspond to a low base for the first half of this year. Overseas brands will have higher product inventories due to supply chain instability and uncertainty in the global economic situation. Beginning in the second half of 2022, they will gradually adjust inventories and reduce orders, and will continue until the first half of 2024 and even the first three quarters. Second, overseas brand inventories have been removed smoothly, normal procurement is expected to resume in the future, downstream demand is expected to pick up, and the capacity utilization rate of leading companies is expected to pick up. Third, the price of raw materials has steadily rebounded, and leading companies are increasingly using cost addition pricing, which is expected to be beneficial. Finally, most leading companies' stock prices are at the lower end of the historical range.

The performance of clothing and home textiles is divided, and some leading companies are expected to continue to grow rapidly

The recovery base for clothing and home textiles in 2023 increased several times, and the performance growth of leading companies in the 2024 sector corresponding to 2023 may be divided. It is expected that only during the pandemic will brand strength improve, or be the first to recover, there is plenty of room for online and offline expansion in the future. The performance of some leading companies with both ability and conditions is expected to continue to grow at a high level. Related companies are mainly focused on sports footwear, home textiles, menswear and high-end women's clothing.

Some leading clothing and home textile companies are expected to regain mainstream recognition through reforms

In the context of the increasing concentration of the clothing and home textile industry and the rise of domestic goods, some leading garment and home textile companies with aging brands and fluctuations in performance are focusing on main brands through organizational restructuring, focusing on main brands, enhancing product strength, optimizing channel structure, real-time internal equity incentives, and cooperation with well-known strategic consulting firms. It is expected that they will regain mainstream recognition.

The Paris Olympics and the wave of women's sports are expected to benefit leading sports footwear and clothing companies

Although in terms of fundamentals, the relationship between whether or not the Olympics were held and the prosperity of the industry that year is not obvious, and the industry growth rate is more correlated with the economy, judging from the 2008-2018 stock price rise and fall data, there is a high probability that leading sports footwear companies will make positive profits during the Summer Olympics. In addition, according to the “China Fitness Industry Data Report” released by Santai Cloud Data Center, in 2022, China's fitness market was 255.9 billion yuan, of which the proportion of female consumers reached 62%. The market size prospects are broad, and the female sports wave favors leading sports footwear and clothing companies.

Investment advice

(1) The textile manufacturing dilemma has reversed; (2) some leading companies in the garment and home textile industry are expected to continue to grow rapidly; (3) some leading garment and home textile companies are expected to regain mainstream recognition; (4) the Olympics and women's sports waves will benefit leading sports footwear and clothing companies.

Risk warning

Risk of fluctuations in the RMB exchange rate; risk of falling raw material prices; risk of sluggish terminal demand; risk of supply chain upgrading falling short of expectations.