Under the impact of the epidemic in 2020, the revenue of companies around the world is generally low. However, the anti-cyclical performance of textile and clothing enterprises in the crisis is excellent:

1. Some strong brands have resumed their growth in 20Q2.

2. With the beginning of 2020Q3, the overall recovery trend of the industry is obvious, most enterprises' revenue is positive compared with the same period last year, and their profits are greatly increased.

3. 2021Q1 recovery accelerates: in the whole shoes and clothing industry, the prosperity of sports shoes and clothing plate has always been better than the industry average.

Since March, the sporting goods sector of Hong Kong stocks as a whole has remained strong.$ANTA Sports Products (02020.HK) $、$Li Ning Co. Ltd. (02331.HK) $、$Xtep International (01368.HK) $Share prices rebounded collectively and hit record highs in early June.

In addition, the leading manufacturer of clothing in the mainland$Shenzhou International Group (02313.HK) $The company also performed well, with its share price hitting a record high on May 27 and now has a market capitalization of about HK $288.6 billion.

According to a research report released by Societe Generale Securities, with the blessing of product strength and cultural self-confidence, it is a good opportunity for domestic goods to break the situation; at the same time, under the accumulated technological research and development and sports resource marketing, a number of national brands that are "easy to wear, good-looking, and good-priced" will eventually emerge and occupy an important position in the international market.

On the long Logic of the rise of domestic products from the Perspective of Product strength

Societe Generale Securities believes that China's sports shoes and clothing market is booming, with both growth and toughness.

The size of the global sports shoes and clothing terminal market in 2020 is about 290 billion US dollars. Since 2014, the Chinese terminal market has continued to expand at double-digit growth rates. Although it has been hit by the epidemic in 2020, the growth rate has dropped by only 2 per cent (the global market has dropped by 15 per cent). The market size has reached about 315 billion yuan. According to Euromonitor, China's terminal market is expected to achieve a recovery growth rate of 23% in 2021 and continue its double-digit growth hub.

In the high concentration and moderate market environment, the share of China's domestic leaders has increased significantly. With the rapid increase in FILA's market share, Anta has achieved a steady jump in its total market share from 12.9% in 18 years to 15.4%. Li Ning Co. Ltd. relies on its own brand strength to achieve share growth from 6% to 6.7%, second only to Nike, Adidas and Anta.

In addition, in March 2021, under the background that international brands were not as expected, consumer patriotism was quickly catalyzed, and Chinese brands won the opportunity to break the situation. With the strengthening of the symbolic meaning of the local brand "domestic products" label, Chinese consumer groups begin to re-examine the rising new domestic products, which is directly good for Li Ning Co. Ltd., Anta, Xtep and other brands.

Hard power: can domestic products fight or not?

Throughout history, the professionalization of various sports in the West has been leading for a long time, which increases the exposure of sports and leads the prevalence of sports culture. The resulting demand for professional functions promotes the rapid development of western sports shoes science and technology.

Since the 1970s, there has been an upsurge of sports in American society. NIKE revolutionarily introduced the power of shock absorption science and technology into sports shoes, and led the wave of structural shock absorption science and technology competition. There has been a surge in functional demand for sneakers. Since 2013, Adidas has led the midsole technology to return to material shock absorption. NIKE's ZoomX technology is regarded as the "reverse cool techs" and carries the great mission of breaking 2 in the human marathon.

However, since the end of 2018, domestic brand midsole technology has entered an explosive period with fruitful results, and sophisticated technology can even compete with ZoomX, which is currently recognized as the strongest foam material in the field of running shoes.

Societe Generale Securities said that the hard power of domestic products has also formed positive feedback among shoe fans, from enthusiasts to the mainstream of the public, thus changing the inherent perception of mass consumers is only a matter of time and communication. Behind it is the awakening of brand awareness, and it is also the Chinese manufacturing system from imitation to learning to innovation.

Innovation-driven matrix product line

Under the iteration of the upgrading of midsole technology, the product matrix of domestic brands of sports shoes is also increasingly rich, and the product system is clear to meet different levels of consumers.

1) Li Ning Co. Ltd.: constantly climb the peak of science and technology, expand horizontally and dig deep longitudinally

Li Ning Co. Ltd. brand insists on taking products as the core, focusing on professional functions, and constantly improving product performance and brand image in combination with fashion trends. With the blessing of science and technology, Li Ning Co. Ltd. 's product matrix can be summarized as "horizontally comprehensive" and "vertically fine".

Horizontal and comprehensive:Resting on the solid accumulation of science and technology, Li Ning Co. Ltd. has the richest product matrix of sports shoes in China, realizing the comprehensive coverage of sports people. Taking running shoes as an example, Li Ning Co. Ltd. can be said to be the only brand in China that has successfully built a perfect product matrix of running shoes. The four series of cushioning, speed racing, support and lightweight are all laid out, and among domestic manufacturers, can provide a richer choice of high-end categories.

Fine vertically:Li Ning Co. Ltd. brand has a deep understanding of marketing, vertically extending a specific series of product lines, through differentiated science and technology configuration, differentiated prices, differentiated resources, so as to complete the construction of hierarchical vertical product series, and get through many consumers from top to bottom.

2) Anta: ploughing the mass market and making breakthroughs in the high-end field

Anta deeply ploughs the mass sports shoes market, and the product development attaches importance to high performance-to-price ratio. based on this, the diversity of performance-to-price ratio and universal functions become Anta's first choice, and the brand tone is relatively weakened.

Anta midsole technology upgrading is mainly aimed at the mass market, the main range of sports shoes hanging price is 400 yuan-700 yuan, the product series is rich, but the product boundaries are not very clear, the high-end competitive field is relatively blank.

High-end and professional are the next product development point of Anta. Anta has taken the lead in attacking the high-end field in the field of running shoes. Anta recently released an iterative and upgraded version of marathon running shoes C202GT, priced at 999 yuan, and plans to release C100 nitrogen technology running shoes.

3) Xtep: create the image of a running expert by breaking the noodles.

Xtep takes the power nest PB core midsole technology as the core point to create 160X series of top speed products, go deep into the running circle, and create his own image as a running expert. According to the demands of different levels of runners, Xtep has created a complete "running shoe matrix": professional and elite runners who pursue speed, ordinary runners who pursue good functionality and comfort, and beginner runners who attach importance to the comfort of running. to achieve the circle from the minority to the masses.

Soft power: "national tide" and "admiration for strength", which is an irreversible long-term trend.

Societe Generale Securities Research newspaper said that Generation Z is full of strong cultural self-confidence of the country, and the wave of national style is quietly set off. At the same time, what young people love is "national tide" and "admiration for strength". When Chinese brands rise strongly, it is a natural process for domestic products to replace imports, and it is an irreversible long-term trend.

Under the leadership of Li Ning Co. Ltd. 's success in breaking the circle, many domestic brands layout trend leisure culture line, with the help of the rich heritage of Chinese culture, embrace young groups, change people's inherent cognition of domestic brands.

1) Cultural confidence and the rise of the national tide

Generation Z, who was born in the 21st century, has experienced a series of dividend periods of China's reform, such as the rapid development of China's economy, material prosperity, the vigorous development of the Internet, China's successful bid for the Olympic Games and so on. In this growing environment, Generation Z is full of strong cultural confidence of the country. In our view, what young people love is "national tide" and "admiration for strength". When Chinese brands rise strongly, it is a natural process for domestic products to replace imports, and it is an irreversible long-term trend.

2) take advantage of Dongfeng to hold hands with top stars

Top stars hold hands with domestic brands, helping brands reach from top to bottom.

On February 27th, 2020, Li Ning Co. Ltd. officially announced that Hua Chenyu, the first star spokesman, became the global spokesman of Li Ning Co. Ltd. sports fashion products; on March 26th, 2021, Li Ning Co. Ltd. and Guanxuan became the second star spokesman-Xiao Zhan became the global spokesman of Li Ning Co. Ltd. sports trend products.

Wang Yibo terminated his contract with Nike on March 25, 2021, and Anta officially announced Wang Yibo as its global chief spokesman on April 29th. Wang Yibo's own image is a lover of sports and trends, and is an all-round player in many sports, such as model, skateboarding, basketball and so on, matching Anta brand image. On the day of signing, the number of topic readings exceeded 1 billion.

Investment suggestion

Under the long-term logical background of the rise of domestic goods, Societe Generale Securities suggests paying attention to the following main investment lines:

1) with the blessing of product strength and cultural self-confidence, it is a good opportunity for domestic products to break the situation. Under the accumulated technical research and development and resource marketing, the market share of domestic brands has accelerated, while the market share of international brands has remained flat or declined slightly. Recommend Li Ning Co. Ltd., ANTA Sports Products, Xtep International and Bosideng International who ushered in new opportunities for domestic products.

2) although it was hit by the epidemic in 2020, the growth rate of sports shoes and clothing decreased by only 2% (the global market fell by 15%). Euromonitor expects China's terminal market to recover by 23% in 2021. 2021-2022 is the year of sports, continue to be optimistic about the deterministic growth of sports shoes and clothing track.

3) the core supplier Shenzhou International Group has stable delivery capacity in the face of uncertain external environment, Shenzhou capacity release is expected to continue to exceed the company's guidelines, textile manufacturing section continues to recommend Shenzhou International Group.

4) the retail section pays attention to Pop Mart International, and the current valuation of Pop Mart International has come to the range recognized by investors. With the relief of the pressure on Pop Mart International's supply chain and the launch of a new hot IP series, the stock price has an upward catalytic power.