Shrinkage Of Raw Materials For Cotton Spinning Has Become A Long-Term Trend.

< p > raw material: < /p >

< p > this month, the spread of "a href=" //www.sjfzxm.com/news/ "> cotton < /a > slightly expanded at home and abroad, but the" inventory / consumption "of the inner cotton ranks high in history, and the price difference between inside and outside cotton is reduced to a long-term trend.

This month, the price of cotton of grade 328 increased by 0.01%, while the Cotlook:A index dropped 2.13%. The difference between domestic and foreign cotton prices (cotton to cotton, discount tax) was expanded from 3690 yuan / ton to 3968 yuan / ton.

The price spread slightly expanded this month, but at present, the "stock / consumption" of cotton is up to 1.27, while overseas (except for other parts of China) "inventory / consumption" is 0.52, and it has been declining since the second half of 2012.

In view of the huge gap between domestic and foreign cotton's "inventory / consumption", we believe that the cotton price differential has been reduced to a long-term trend.

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< p > export: < /p >

< p > March, the export of textile and clothing decreased by 11% parts, which was affected by the high base number. The operating rate showed a moderate recovery.

In March, < a target= "_blank" href= "//www.sjfzxm.com/" > textile > /a > a target= "_blank" href= "//www.sjfzxm.com/" > clothing < 2011 > export volume of US $16 billion 719 million, a decrease of 11% compared with the same period last year, which is in sharp contrast with the rapid growth of 1-2 month's textile, "apparel export" < 31.82%, partly due to the higher export base in 2011 and March 2012 (2011 and March 2012 respectively, 50.55% and 13.41% respectively).

Although export figures in March were lower than expected, weaving companies showed a moderate recovery rate in operation: in the first half of April 2013, weaving enterprises began to operate at 73.5%, up from 68% in the same period in 2012.

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< p > domestic demand: < /p >

< p > in March, the clothing industry increased by 17.4%, the ratio rose by 8 percentage points, and the retail sales of 100 clothing increased by 4.7%.

In March 2013, the amount of textile clothing < a target= "_blank" href= "//www.sjfzxm.com/" > shoes < /a > hat knitted goods Agency increased by 17.4%, an increase of 8 percentage points, compared with the 1-2 month plain domestic demand data.

Although it fell by 2 percentage points over the same period last year, it has been achieved in the context of a sustained decline in clothing CPI growth since 2012, indicating that sales have begun to resume growth as the price of clothing has stabilized.

The clothing sales data of the 100 major retail enterprises in China showed that the volume of clothing retail sales increased by 4.7% in March, 2.7 percentage points higher than that in 1-2 months, and higher than the 2% growth rate in 2012.

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< p > Market Review: < /p >

< p > textile and apparel wins the market.

The Shanghai Composite Index fell 4.72% this month, the Shenzhen composite index fell 4.62%, the apparel home textile sector fell 2.98%, and won the market. On the one hand, the market's brand a target= "_blank" href= "//www.sjfzxm.com/" > clothing > /a > autumn and winter orders will be lower than expected, and the worries of the annual reports and quarterly reports have been released in the first 2 months. On the other hand, in March, hundreds of retail sales data further showed that clothing sales were warmer in the context of price increase.

Exports were slightly lower than expected in March, and the textile manufacturing sector fell by 3.46%, slightly running the garment home textile sector.

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< p > Valuation: < /p >

< p > compared with vertical and horizontal, the current valuation is more reasonable.

At present, the static PE of the textile and garment sector is 18.75 times, and the premium rate is 12.86 times that of all A shares, 1.52 times that of PE, slightly higher than that of 1.49 times since 2008.

At present, the average PE of A share brand clothing company corresponds to the average PE of EPS in 2013 is 15.58 times, which is higher than the average level of 13.41 times of Hong Kong stock, but it is lower than the average of 18.16 times of overseas market.

Valuations below the industry average include AOKANG International (9.94 times in 2013), reported bird (10.24 times PE), seven wolves (10.46 times), nine herd Kings (12.76 times) and Luo Lai home textiles (13.77 times).

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< p > investment recommendation: < /p >

< p > (1) < a href= "//www.sjfzxm.com" > textile manufacturing < /a >: at present, the cotton "stock / consumption" is as high as 1.27, while overseas (except for other parts of China) "inventory / consumption" is 0.52, and it has been declining since the second half of 2012.

Under the huge gap between the "inventory / consumption" of cotton and inside and outside, the cotton price difference has been reduced to a long-term trend. In the next 1 years, we should focus on the benefits of less than a href= "//www.sjfzxm.com" > cotton price difference < /a > narrowing of Lu Tai A (cotton spinning head) and Bailong Oriental, Huafu color spinning (color spinning duopoly).

(2) brand clothing: in the context of distribution as the main selling mode, we believe that the order of the brand clothing enterprises will be lower than expected, the company level inventory is high or lagging behind. At present, men's wear faucets are valued at 10-12 times, and already have a higher margin of safety. If the retail sales of terminal garments continue to pick up, the companies that sell themselves as the main selling modes (such as Langer and bonndi Road) are expected to take the lead.

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< p > risk warning: < /p >

< p > internal and external economic recovery is lower than expected, RMB appreciation, channel costs rise, terminal inventory is high.

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