Garment Industry Presents A Trend Of Profit Decline And Profit Rise.

The first 8 months of the year

The total turnover of the 108 Canton Fair increased by 6.711% over the same period last year, down 9.25 percentage points from the same period last year.

We regard the 108 Canton Fair as one of the performances of the peripheral economy, which is still sluggish. We also take the major export countries' consumption expenditure, consumer confidence and other indicators as well as the trend of RMB exchange rate to judge, we can see the prospect of the resumption of external demand.

We maintain that textile and garment exports continue to decline in the judgement, expected in 2011 textile and garment export growth dropped to around 15%.

Cotton price rising trend has not weakened

In spite of the fact that the state has already issued a credit tightening policy that restricts cotton enterprises, textile and garment exports have slowed down, and small and medium-sized textile enterprises have cut down production and other factors, cotton prices have rebounded in mid November. Some market analysts also believe that cotton prices are slowing down. However, we maintain the judgment that cotton prices will not change trend according to the fact of supply and demand gap.

Money creates consumption

In the first 10 months of 2010, the retail sales increased by 18.30%. In August, the sales of clothing sold by hundreds of key retail enterprises increased by 16.8% over the same period last year, indicating strong domestic consumption capacity.

Because the income level of residents is still in the ascend trend, the proportion of Chinese residents' consumption in total income is still relatively low, and the propensity to consume is rising continuously.

We expect retail sales to grow at around 18% in 2010. According to historical experience, money creates consumption. In the 1-2 years after the expansion of M2, social consumption began to enter a period of high growth. In 2009, the M2 growth rate remained at 20%-30%, and the over issuance of money, which will be reflected in the consumption field in 2011, plus the expected inflation rate of around 4%, we expect the retail sales growth in 2011 to be between 18-20%.

Industry "neutral", clothing sub industry "overweight"

In the context of consumption upgrading and inflation prevention, we have long been optimistic about the prospects of brand clothing.

We compare the growth process, financial data and market value of domestic brand clothing listed companies with overseas brands GAP, POLO, ZARA and H&M. We believe that the brand clothing and home textile industry are still in the early stages of the word, and the future prospects are broad. Compared with the second tier cities, the three or four line market of urban and rural areas and rural areas will increase faster in the future, while the low concentration of industries on the three or four line market will provide a larger market space for those companies with independent brands and those who are experiencing channel sinking.

Investment evaluation of key listed companies.

We are optimistic about the long-term growth prospects of the formal clothing and casual wear industry in brand clothing. We will continue to take good care of the silver and Jiangsu industries.