Textile And Apparel: Supply Side Reform, Elimination Of Backward Production Capacity, And Encouragement Of Innovation

Operation status: revenue and profit growth continued to fall, demand side prospects are not optimistic, supply side reform is imperative.

Last month 1~11, the main business of the textile industry increased by 5%, and the total profit increased by 6.8%.

Although the textile industry still achieved growth in 2015, the growth rate of income and profit has continued to decline since 2013.

From the downstream, exports declined, 2015

The total amount was 4.88% lower than that in 2014.

The trend of textile industry shifting to cheaper Southeast Asian countries is irreversible.

The second is the domestic consumption downturn.

Consumption growth continued to fall.

Since 2014, the annual total consumption expenditure has dropped from two percentage points over the total retail sales of consumer goods to two percentage points below the total retail sales of consumer goods.

Under the background of internal and external difficulties, the profitability of the textile industry is hard to maintain.

At the same time, the labor cost accounting for 10-20% will continue to rise in the future, and the supply side reform of textile industry is imperative.

The past and future of the supply side reform of textile industry: in the 90s, the textile industry occupied an important position in the economy, but due to overcapacity and backward equipment, the industry profits were low and the losses were serious.

In the 1998-2002 century, the textile industry reform vigorously eliminated the backward production capacity, closed down unprofitable factories, and encouraged exports, raised the export rebate rate, and reformed the cotton circulation mechanism.

Since then, the textile industry in 2002 has significantly increased productivity.

The output of yarn and cloth has increased steadily in the past 02 years, and the profit rate of the industry has increased steadily from the low point, and the profit and loss enterprises have been reduced.

The industry achieved great leap forward development in the next more than 10 years.

The supply side reform of the textile industry in 13th Five-Year is expected to focus on eliminating backward production capacity and adjusting product mix.

(1) capacity reduction: low value-added production capacity.

It is estimated that the supply of textile industry will continue to eliminate backward production capacity, especially in the context of high labor costs, and the future survival space of low value-added products will be even more limited.

(two) structural reform is needed: for clothing consumption, domestic consumption demand is still great, but the supply side has room for improvement in demand matching. High value-added, innovative products and so on often can not meet the needs of consumers. We need to further strengthen product innovation and provide high quality and high value-added products.

From the angle of concentration, we should pay attention to the leading enterprises in the textile sub industry and pay attention to the civil aviation shares of the leading dyeing and printing enterprises.

First, from the perspective of the industry, the total supply of printing and dyeing has been gradually reduced and the production capacity has been continuously carried out. From a regional perspective, Zhejiang's printing and dyeing accounts for more than 6 of the company's printing and dyeing industry, and there is also a rising trend; the industry's profit level basically shows an upward trend, and the scale of income and profit margin are rising year by year.

Second, at the company level, as a leading industry, the civil aviation shares are significantly superior to other companies in the same industry in terms of scale and profitability. We believe that the main reason lies in the scale effect and the layout of the whole industry chain for printing and dyeing business.

In recent years, the company's revenue and profits have maintained a relatively stable growth trend, and the performance of the textile industry has been growing steadily. Our forecast for the company's 2015-2017 year profit is 0.75 yuan, 0.87 yuan and 0.99 yuan, corresponding to the current stock price valuation of 14, 12 and 11 times, the valuation is low, "overweight" rating.

Attention should be paid to China Textile share and Lu Tai A from the perspective of structural adjustment, enhancement of added value, realization of intelligent production and industry 4.

Huafang shares: the company is a leading enterprise in the domestic textile and dyeing industry. Besides printing and dyeing, clothing and home textile products are involved.

In October 2015, the company announced a non-public offering plan showing that the company intends to raise funds of not more than 900 million yuan, of which 150 million yuan is used to build an intelligent center of textile industry chain based on industry 4. After completion, it can complete 200 varieties of research and development garments, 1500 fine printing varieties, 500 clothing styles, 150 home textile products and 150 home textile fabrics annually, and promote the integration of textile and strategic emerging industries.

Lu Tai A: is a leading textile enterprise that integrates spinning, dyeing, weaving, finishing and clothing in the whole industry chain. The leading products are shirts, dyed fabrics and shirts.

More than 70% of the company's products are exported.

The company is the Ministry of information industry's 2014 Internet and industry integration innovation pilot enterprise (the first industrial 4 pilot enterprise). The pilot project is a networked customization production system based on virtual fitting and big data technology, leading the layout in intelligent production, and taking the lead in the supply side reform.