According to the research report released by GTJA, downstream destocking has basically ended. Judging from the order tracking of top manufacturing companies, there is no need to worry about the recovery trend of orders, especially leading companies that have the logic of grabbing market share and expanding customer base.

GTJA's main opinions include:

Investment suggestion: Currently, downstream destocking has basically ended. Judging from the order tracking of top manufacturing companies, there is no need to worry about the recovery trend of orders, especially leading companies that have the logic of grabbing market share and expanding customer base.

The global textile manufacturing industry has experienced five transfers, and leading manufacturers have taken advantage of the trend. Textile manufacturing belongs to labor-intensive industries (especially shoe manufacturing), so the center of global textile manufacturing has shifted several times along with the comparative advantage of labor costs in various regions, including the United Kingdom, the United States, Japan, the four Asian dragons, mainland China, and Southeast Asia. Most of the leading shoe manufacturers (such as Yue Yuen and Feng Tay) were born in the 1970s-1990s (seven of the top ten shoe suppliers for Nike were established in this stage). Leading apparel manufacturers such as Shenzhou International were also born in 1990. The above companies are products of the transfer of the global textile manufacturing center to the four Asian dragons and mainland China, and have benefited from the transfer of the industry center to achieve rapid development.

Shoe manufacturers: The industry concentration is relatively high, and the leading companies have outstanding advantages in research and development and management. Main characteristics: 1) The industry concentration is relatively high: There are more processes in shoe production, and the barriers to entry are relatively high. At the same time, it is difficult to separate each process. Therefore, the industry concentration is higher than that of the apparel processing industry. 2) Labor-intensive: Shoe manufacturing has fewer processes that can be automated, and the labor-intensive features are more prominent. 3) Competitive barriers are mainly reflected in: ① Management ability: the main responsibility of manufacturers is to convert 2D designs into 3D samples and finished products, so the competitive advantage is mainly reflected in the production cycle, fast response, stability, and profitability, which are fundamentally related to the manufacturer's management ability. ② R&D capability: Some manufacturers have cooperated with brands for up to 40-50 years, accumulating rich experience in product development. Brand owners actively strengthened cooperation with them, such as Nike’s first Asia R&D center was established in Feng Tay's Taiwan headquarters in 1992.

Clothing manufacturers: The industry concentration is relatively low, and the leading companies pursue integrated production. Main characteristics: 1) The industry concentration is relatively low: Clothing production has fewer processes than shoes (yarn-fabric-garment), and some processes have relatively low barriers to entry. Furthermore, each process is easy to separate, so the concentration is lower than that of shoe manufacturing, and most companies focus on developing limited key processes. 2) Manufacturers are mostly seeking to achieve integration: In the clothing manufacturing value chain, the fabric and garment-making processes have relatively high added value. Most industry players hope to involve the above processes, and even achieve vertical integration of the entire chain. 3) Competitive barriers are mainly reflected in: ① Vertical integration: outstanding profitability advantages, but the difficulty of implementation is relatively high. The difficulties include strict entry requirements for the fabric production process, large-scale equipment investment and capital requirements, and large-scale production of garment processes, etc. ② Product R&D capability: mainly reflected in the fabric and garment-making processes. Shenzhou International developed AIRism fabric for Uniqlo, and Regina Miracle adopted seamless bonding technology to make seamless clothing, etc.

Risk warning: The recovery of end demand may be weaker than expected, and exchange rates may fluctuate greatly.