The Zhitong Finance App learned that in 2024, Zhongtai Securities published a research report saying that in 2024, on the industry side, the cost performance consumption trend of brand apparel continues, and there is still uncertainty about terminal demand; on the brand side, the overall channel inventory of brand apparel is gradually digesting, and brand potential is divided; at the same time, it is expected that sentiment catalysis will form during the Olympics. It is recommended to focus on the three main lines of strong growth, undervaluation and high dividends, and repair of leading valuations.

Main line 1: The rise of vertical segmentation tracks, and the growth momentum of high-end brands deeply involved in consumer segmentation is strong. The bank is optimistic that the sports and fashion circuit will continue to grow, and the number of channels and store efficiency can be expected to improve. Main line 2: Undervalued and high-dividend assets, leading home textiles & menswear companies are growing steadily, and dividends are impressive. Main line 3: Functional sneakers and clothing leaders have entered the value range, focusing on valuation recovery opportunities under management improvements. Pessimistic price in expectations formed by short-term flow and discount fluctuations, and marginal improvements are expected to catalyze valuation elasticity. A single brand extends its circle around the main channel, or companies with multi-brand matrices and operating capabilities, and a high-profile segmentation circuit are more likely to achieve a higher level of growth than the industry.

The main views of Zhongtai Securities are as follows:

Recovery in 2023: textile and garment performance is superior to most consumer industries.

Overall, the textile and garment sector outperformed most consumer industries, with branded apparel outperforming textile manufacturing. From the beginning of 2023 to December 13, Shanghai and Shenzhen 300 fell 13.0%, and the textile and garment sector was +4.1%. Among them, brand apparel was +5.0% and textile manufacturing was +3.0%. The former's better performance was mainly due to the fact that the overall pace of recovery on the demand side was faster than that of the manufacturing side.

Brand Clothing: Continuing Differentiation, Focus on Undervaluation Flexibility and High Prosperity Track Leader

1) Reopening in 2023: The main theme of going to the library, high-end menswear and cost-effective consumption flexibility are outstanding. In 2023, along with the restoration of logistics and travel, brand apparel sales recovered overall, but trends diverged. Cost-effective sports brands, business travel & high-end menswear sales are strong. On the corporate side, revenue recovered rapidly in the first half of the year against the backdrop of a low base and demand recovery. Profit performance was better than revenue under the dominance of digesting inventory and control discounts. By Q3, growth had slowed, and some brand discounts fluctuated month-on-month.

2) Looking ahead to 2024: It is expected that they will enter the race lightly, focusing on the growth of segmented tracks and the elasticity of undervaluation. In 2024, on the industry side, the cost performance consumption trend continues, and terminal demand is still uncertain; on the brand side, overall channel inventory is gradually digested and brand potential energy is divided; at the same time, sentiment is expected to catalyze during the Olympics. It is recommended to focus on the three main lines of strong growth, undervaluation and high dividends, and repair of leading valuations. Main line 1: The rise of vertical segmentation tracks, and the growth momentum of high-end brands that are deeply involved in segmentation consumer segments is strong. The bank is optimistic that the sports and fashion circuit will continue to grow, and the number of channels and store efficiency can be expected to improve. Main line 2: Undervalued and high-dividend assets, leading home textiles & menswear companies are growing steadily, and dividends are impressive. Main line 3: Functional sneakers and clothing leaders have entered the value range, focusing on valuation recovery opportunities under management improvements. Pessimistic price in expectations formed by short-term flow and discount fluctuations, and marginal improvements are expected to catalyze valuation elasticity. A single brand extends its circle around the main channel, or companies with multi-brand matrices and operating capabilities, and a high-profile segmentation circuit are more likely to achieve a higher level of growth than the industry.

Textile manufacturing: Overseas inventories have been removed, and the manufacturing side is booming.

1) Resuming in 2023: The manufacturing side is under pressure, and the leading alpha in the segmentation circuit is obvious. Since 22Q4, the revenue of the textile manufacturing sector has been under obvious pressure due to factors such as weak demand for overseas inventory removal and a high base, and the profit side has been mainly affected by fluctuations in raw material prices. However, the leaders in the subdivision circuit still showed strong alpha. Looking at the industry level, the industry has gradually recovered from the downturn. The revenue growth rate of the textile industry and the clothing and apparel industry is showing a gradual improvement trend. The textile industry is performing better than the clothing and apparel industry. In January-October, the revenue of the textile industry was -12.4%, and the revenue of the clothing and apparel industry was -18.4%.

2) Demand side: Domestic demand performance is steady, exports have gradually improved since Q3, and positive growth is expected to resume in '24. Since this year, since this year, China's clothing and yarn export prosperity has been weak, mainly affected by factors that overseas brands have gone out of stock since 22H2. China's clothing and yarn exports have continued to improve since July. Vietnam's textile exports have shown a marginal improvement trend, and improvements in footwear have not been obvious yet. In terms of overseas dewarehousing, the bank determined that dewarehousing was gradually coming to an end, and order improvements can be expected in 24 years. 1) The decline in the stock sales ratio of US wholesalers in 23H2 accelerated. In October '23, the stock to sales ratio was 2.77 (the 15-19 range was 1.92-2.30), and the 24-year inventory-sales ratio is expected to fall back to the normal range. 2) Inventories of leading overseas brands continue to be removed. As of the 23Q3 financial report, the stock sales ratio of leading brands such as Nike and Adidas has basically fallen back to the normal range. 3) Shipments of Taiwanese footwear manufacturers Yuyuan and Ruhong improved in October.

3) Manufacturing side: Overseas layout trends will continue. The process of expanding leading overseas production capacity continues. Southeast Asia (Vietnam, Cambodia) is the main layout region. Vietnam's additional taxes may have a certain impact on profits, but considering factors such as tariffs and labor costs, the overall trend of overseas production capacity expansion will continue.