The textile and apparel industry enters a weak recovery stage

Recently, “People’s Daily” conducted an in-depth investigation of more than 100 entities in 3 provinces and 6 cities, stating that the difficult period has basically passed, but there may be recurrences.

How is the climate of the textile industry going? Are the hard days behind you?

Recently, 70 listed textile and apparel companies in Shanghai and Shenzhen stock exchanges disclosed their 2017 semi-annual report previews. Most of the listed companies are industry leaders. Although they cannot get a full picture of the industry, clues of industry changes can still be detected from this report.

In the report, 20 companies are expected to have a net profit of more than 100 million yuan, and 30 companies are expected to have a net profit of more than 10 million yuan. Nearly 80% of the companies are expected to achieve rapid growth in net profit.

The share of large enterprises is expected to increase against the market

Rongsheng Petrochemical ranks first with an estimated net profit of nearly 1.2 billion yuan, Semir Apparel ranks second with an estimated net profit of 513 million yuan to 666 million yuan, and Huafu Colored Spinning ranks third with an estimated net profit of 391 million yuan to 481 million yuan in the first half of the year. .

Regarding the rapid growth of performance, Rongsheng Petrochemical said that it is mainly because the aromatics segment will steadily release benefits, which will significantly enhance the company’s profitability compared with the same period. In addition, the market prices of the PTA segment and the chemical fiber segment are relatively stable.

Taking Semir Clothing as an example, the company’s rapid performance growth is mainly due to the continued improvement of its casual wear business, the steady growth of its children’s business and the rapid development of its Internet business, which have promoted its own performance growth. After the company transitioned to children’s clothing, the company’s performance has been outstanding. Judging from the performance in the first quarter of 2017, the sales of children’s clothing brand “Balabala” still maintained more than double-digit growth and continued to consolidate its position as a leading brand of children’s clothing.

Relevant people said that now textile and garment companies must transform according to market consumption, and improving product sales has become one of the main reasons for the improvement of corporate performance. Taking Huafu Colored Spinning as an example, the positive half-year report is based on three reasons: first, the increase in main yarn sales and product structure optimization; second, the development of front-end and back-end network chain business; third, strengthening resource integration and internal management, and determining Additional projects are completed and period costs are reduced.

Great Wall Securities analysis believes that domestic cotton prices have basically stabilized, overseas yarn prices have risen sharply, domestic and foreign demand has slowly picked up, and the overall operating prosperity of the textile manufacturing industry is relatively high. With the advancement of supply-side reform and the integration and reshaping of the industrial chain, advantageous resources will gradually flow to large enterprises in the future, and large enterprises will further extend upstream and downstream industrial chains. Orders will gradually become concentrated. Industry market shares are concentrating, and the share of large enterprises is expected to Against the backdrop of economic growth, it has become increasingly difficult for small businesses to survive. In the future, small businesses will only seek development through resource reorganization, brand innovation, channel diversification, expansion of financing, etc., and due to changes in regulatory policies, companies with weak competitiveness and small market capitalization will directly develop through shell sales and other methods. Resource realization channels are blocked.

Mergers, acquisitions and new business transformation promote growth

Research reports from many institutions pointed out that the textile and apparel industry has entered a weak recovery stage. From a performance perspective, mergers and acquisitions and new business transformation have contributed to significant growth in the performance of some companies.

Among the listed clothing companies with pre-increased net profits, Modern Avenue’s 2017 semi-annual report has the highest growth rate. It is estimated that the net profit attributable to shareholders of listed companies will reach 95 million yuan to 105 million yuan, an increase of approximately 447.60% to 484.19 yuan over the same period last year. %; Caesar Culture has achieved pre-increase, and the net profit attributable to shareholders of the listed company is expected to be approximately 88.9793 million yuan to 111 million yuan, an increase of 100% to 150% over the same period last year; Vignas has pre-increased, and is expected to be attributable to listing The company’s shareholders’ net profit increased by nearly 50% to 120% compared with the same period last year.

Taking Modern Avenue as an example, acquisitions have become one of the reasons for the growth of corporate performance. During the reporting period, investment income was obtained from the disposal of subsidiary equity; 100% equity of Wuhan Yueran Xindong Network Technology was acquired, and the company has been included in the consolidated statements since May 2017. It is understood that Wuhan Yueran Xindong Network Technology’s main business is the development and operation of mobile Internet social tool applications, targeting overseas mobile Internet users.

The reason for the change in Caesar Culture’s performance is that Tianshang Youjia was incorporated into the consolidation scope in June during the same period last year, so the net profit attributable to shareholders of listed companies in this period increased significantly compared with the same period last year. Tianshang Youjia’s main business is the development and operation of mobile online games. The game products currently in operation mainly include “New Sword and Fairy 3D”, “Purification”, “Constellation Goddess”, “Plants vs. Zombies OL”, etc. After Caesar Culture acquired Tianshang Youjia, it gradually built a diversified development platform focusing on the clothing and online game industries and supplemented by the financial industry, and accelerated the company’s transformation, upgrading and structural adjustment through a three-wheel-driven development approach.

The reason for the rapid growth of Vignas’ performance is the impact of the company’s consolidated statements after acquiring TeenieWeenie.

GF Securities research report believes that the acquisition of TeenieWeenie has enriched the company’s brand matrix, formed synergies in customers, design, production, and channels, significantly increased the company’s profits, and provided stable cash flow. In addition, TeenieWeenie was introduced to learn from its multinational operation experience and steadily promote the company’s international development.

Third- and fourth-tier cities have become a blue ocean of competition

A research report from Everbright Securities pointed out that after the rise of personalized consumption in the market and changes in consumption concepts, clothing companies have also adopted the approach of design as king, small batch production, and replacement of goods at any time to meet the various needs of consumers. Therefore, many clothing companies have gathered in third- and fourth-tier cities in China.

The research report of Huatai United Securities also shows that since 2007, third-tier cities (especially third-tier cities in the central and western regions) have replaced first- and second-tier cities and become areas with the fastest retail growth. Crucially, the report points out that third- and fourth-tier cities are still dominated by traditional retail supply such as street stores, and high-quality retail supply is scarce. Commercial land prices in third- and fourth-tier cities have risen slowly; cost advantages and policy support have further reduced the risk of corporate channels sinking. According to calculations, newly opened stores in the third and fourth tiers are expected to have the same sales per square meter at 6,000 yuan. The cultivation period for newly opened stores in the third and fourth tiers of many companies is only two years.

In addition, the markets in first- and second-tier cities and third- and fourth-tier cities are in different stages of consumption upgrading. They are in the stages of stock upgrading and incremental expansion respectively, and their contribution mechanisms to consumption are different. The consumption outlook in first- and second-tier cities is changing from “brand-oriented” to “quality-oriented”, and the proportion of high-net-worth individuals and their consumption contribution will increase. Third- and fourth-tier cities will be the blue ocean for clothing brands to compete for increased share. Driven by the three major driving forces of population return, income growth, and infrastructure improvement, brand consumption demand will be developed, and local clothing brands will benefit from the strengthening of consumer brand awareness. and the promotion of new channel layout.

Source: China Textile News