Since late October, the scope of the old-for-new policy has continued to expand, allowing for policy benefits in both online and offline channels, with leading clothing brands being the first to benefit.
According to Zhitong Finance APP, gtja has released research reports stating that since late October, the scope of the old-for-new policy has continued to expand, allowing for policy benefits in both online and offline channels, with leading clothing brands being the first to benefit. Since October, online performance has outperformed other sub-sectors of clothing, with an optimistic outlook for 2025. From a cyclical perspective, channels are steadily expanding, and if the terminal consumer environment improves, there is potential for a valuation and performance recovery known as the Davis double hit. In terms of textile manufacturing, the outdoor processing sector is showing high prosperity in 2024, considering that downstream customer inventory is at a low level and demand is continuously improving. Manufacturing leaders are actively laying out overseas capacity in Southeast Asia, and as capacity ramps up, performance flexibility is expected to be released.
GTJA's main opinions include:
Market review
Clothing: Q1 showed a weak recovery in terminal sales, while in Q2, retail pressure became evident under a high base, with sales continuing to weaken in H2. However, brand performance has varied; for instance, some brands saw slight improvements in sales due to the singles' day sales, and home textile brands benefitted from the old-for-new policy, outperforming their peers online.
Textile manufacturing: From the perspective of order prosperity, outdoor processing > new materials > traditional cotton spinning industry chain, with the outdoor processing industry chain in high prosperity. Since Q2, downstream customer inventory has gradually recovered to a healthy level, and the replenishment cycle has arrived, showing continued improvement in prosperity.
Clothing sector.
Sales are awaiting improvement, with brand differentiation continuing. It is recommended to focus on three main lines: 1) The home textile line for replacing old with new: Since late October, the scope of the old-for-new policy has been continuously expanding, with online and offline channels both able to enjoy policy benefits. Leading brands are benefiting first, and since October, online performance is better than other sub-sectors of clothing, with an optimistic outlook for 2025. 2) High-dividend line: Terminal discounts are stable, channel efficiency is continuously improving, and Q4 sales are expected to improve sequentially. The fundamentals in 2025 are steady and positive, with high dividends providing a safety margin. 3) Pro-cyclical line: Channels are steadily expanding, and if the terminal consumption environment improves, there is hope for a valuation and performance recovery double boost for Davis.
Textile manufacturing sector.
The outdoor OEM track in 2024 is showing high prosperity. Considering that downstream customer inventories are at low levels and demand is continuously improving, leading manufacturers are actively laying out overseas production capacity in Southeast Asia. As production capacity ramps up, performance elasticity is expected to be released. In the medium to long term, the scarcity of production capacity in Southeast Asia will be prominent, and the market share of leading manufacturers among customers is expected to steadily increase.
Regarding Symbol.
Clothing: Home textile subsidy policies catalyze; the fundamentals are steady and positive. Recommended are shanghai shuixing home textile (603365.SH), luolai lifestyle technology (603155.SH), and shenzhen fuanna bedding and furnishing (002327.SZ); for high-dividend symbols, recommended are zhejiang semir garment (002563.SZ), hla group corp. (600398.SH), and jnby (03306); for leading pro-cyclical consumer stocks, if consumption policies continuously catalyze, valuations are expected to recover. Recommended are baoxiniao holding (002154.SZ) and biem.l.fdlkk garment (002832.SZ).
Textile manufacturing: The outdoor OEM industry chain continues to show good prosperity, with current downstream inventories returning to a healthy level and order demand strong. In the medium to long term, the advantages of overseas production capacity layout are becoming prominent, and customer market share is expected to increase. Recommended are zhejiang ziran (605080.SH) and zhejiang jasan holding group (603558.SH).
Risk warning
Terminal consumer demand is below expectations, industry competition intensifies posing risks, and there are risks of raw material price fluctuations.