Development Trend Of Textile, Clothing, Footwear And Hat Industry In 2008

Despite internal and external pressures, the domestic textile industry has been running well in the past 07 years.

We initially expect that the total income and profit of textile industry will increase by 20% and 30% respectively over the past 07 years, of which the number of enterprises increased by more than 10%, and the export growth rate will be between 18% and 20%.

The growth rate of fixed assets investment remained high, and the prices of main raw materials were running smoothly. Domestic demand played an increasingly important role in promoting the development of the industry.

We believe that the old textile industry is experiencing an active and passive industrial pformation and upgrading. The growth mode of industry growth mainly based on capacity expansion and homogeneous primary products OEM export is gradually being abandoned, and the industry development mode mainly based on technological innovation, brand cultivation and channel construction is being nurtured and will become the mainstream mode in the future.

The outstanding groups, represented by the listed companies, have already started the industry pformation and the exploration of new business.

Give the industry 08 years "neutral" investment rating.

Industry grew rapidly 07 years in October, the main products of the textile industry continued to grow rapidly.

Among them, the recovery rate of chemical fiber industry benefited significantly, the first ten months of domestic chemical fiber production was 19 million 770 thousand tons, an increase of 19.26% over the same period last year, especially the viscose fiber and spandex fiber driven by industry recovery, the output increased by 26.26% and 28.43%, respectively.

In the first ten months, domestic clothing production basically remained stable, an increase of 14.01% over the same period last year, and the growth of yarn and cloth output was 17.26% and 13.86% respectively.

But we also believe that this multi factor driving industry efficiency growth is very difficult to sustain.

According to the statistics of China's first textile network, the total revenue and profit of Enterprises above Designated Size in 2007 and August increased by 22.86% and 37.39% respectively, and the number of enterprises increased by 10.43% over the same period last year from 1 to August.

In addition to the increase in efficiency brought about by the increase in quantity, we believe that the main reason for the economic performance of the industry under internal and external pressures is the high returns from diversified investment of many enterprises, the decrease in the ratio of cost brought by management capability upgrading, the increase of labor productivity brought about by the upgrading of technological equipment, the comprehensive recovery of the chemical fiber industry and the ability to pfer the industry's international comparative advantage.

Data show that in the first 8 months, the industry's operating expenses and management fees increased by 16.45% and 17.63% compared to the same period last year, when the main industry income increased by 22.86%, significantly lower than the growth of revenue.

From the perspective of sub sectors, the chemical fiber industry has benefited from economic recovery and eye-catching performance. The total sales revenue and profit in the first 8 months increased by 25.89% and 114.99% respectively.

From the perspective of industry profitability, the gross profit margin and profit margin of the textile industry in 07 months ago were 10.82% and 3.83% respectively, and the pre tax profit margins rose slightly compared with the 06 year's annual level. The profit margin of the textile industry was 10.82% and 3.83% respectively.

We believe that the main reason for the slight increase in the profitability of the industry lies in the continuous adjustment of product structure in the industry, research and development, the enhancement of value-added products brought about by the increase in investment in technology and equipment, the increasing pfer of industries to the lower reaches, and the enhancement of business management capabilities.

We expect that the profitability of the industry will remain stable for the first 08 years, and the possibility of a marked decline is unlikely.

However, taking into account the continuous expansion of industry capacity, the decline in export growth, the rise in costs and the appreciation of the renminbi and other internal and external factors, the overall profitability of the industry in the next 2 to 3 years will hardly be greatly improved.

Moreover, we believe that the cost control of enterprises is limited. The marginal effect of future unit price increase (or to continue the pfer of cost pressure to the downstream) will also gradually decrease, especially in the investment income and the recovery of the chemical fiber industry. There are also obvious short-term characteristics. Therefore, the 07 year high profit growth of the industry will not be sustainable in the future.

The statistics show that in the first 10 months of 2007, China's textile industry, textile and footwear manufacturing industry and chemical fiber manufacturing industry actually completed investment of 123 billion 28 million yuan, 59 billion 303 million yuan and 21 billion 362 million yuan, up 25.40%, 43.10% and 38.20%, respectively.

Compared to the same period last year, the growth rate of investment in the three largest sub sectors of textile industry still showed an upward trend. In the first 10 months of 2007, the investment growth rate of China's textile industry, textile and footwear industry and chemical fiber manufacturing industry increased by 3.3 percentage points, 6.2 percentage points and 15.20 percentage points respectively, and the fixed assets of the industry remained hot.

In particular, the growth rate of investment in clothing and chemical fiber industry is far higher than the average level of fixed asset investment growth of 26.90% over the same period.

Barriers to entry are relatively low, investment is fast, international competitiveness is more obvious, and industry prosperity makes capital flow into clothing and chemical fiber sub industries.

However, the persistent hot trade investment, especially the growth rate of investment is still higher than the export growth rate and the growth rate of domestic textile and garment retail sales, which will further aggravate the structural overcapacity of the industry and weaken the profitability of the corresponding sub sectors in the future.

We expect that the trend of industrial investment shifting from east to west will continue and become increasingly evident. In the medium to long term, the central and western regions of China will become the production base for primary products in the textile and garment industry, while the eastern region will gradually develop into a textile industry area dominated by brand, channel construction and new technology research and development.

Domestic demand has been steadily enhanced. With the sustained and rapid growth of the national economy, the demand for textile and clothing is increasing. The domestic demand ratio of domestic textile industry in 2000 is 66.80%, and the proportion in the first 8 months of 2007 increased to 75%.

The exuberant domestic demand has become the main support for the steady growth of the domestic textile industry, and will continue to become an important factor for the industry to resist other negative risks in the next few years.

In recent years, domestic textile and clothing sales have been showing a good growth trend. The latest statistics show that 10 months in 07 years ago, the total retail sales of domestic textiles, shoes, hats and needles and textiles increased by 32.6% over the same period last year, more than 14.5 percentage points of the total retail sales of social consumer goods in the same period, and far exceeding the 19.74 growth in the same period of export growth.

Foreign historical experience shows that with the continuous increase of per capita disposable income of domestic residents, especially after the per capita GDP exceeded 1000 US dollars, the demand for textile and clothing, especially high-end textile and garment products will increase significantly. Therefore, domestic demand pull will be more beneficial to the development of medium and high grade brand clothing enterprises.

We anticipate that the development of the domestic demand market, especially the rural market, will partially smooth the fluctuation of the export growth potential and ensure that the domestic textile industry will continue to maintain steady growth.

However, we must point out that the growth of domestic demand is gradually released, and there is little possibility of explosive growth. We roughly estimate that the domestic sales of domestic textile and apparel will maintain an annual growth rate of about 10% in the future.

In view of the sustained and optimistic domestic sales, we believe that the enterprises that are mainly domestic sales and already have a certain scale and brand base will have more room for growth in the future.

The export price increments decreased according to the statistics of China Customs. In the 10 months 07 years ago, domestic textile and garment exports still maintained a relatively fast growth, with a total export volume of US $138 billion 870 million, an increase of 19.74% over the same period last year.

It is worth noting that the export growth rate of 20% in the first 10 months was achieved under the heavy pressure of "RMB's cumulative appreciation of 5% since the beginning of the year, the reduction of domestic garment export rebate rate from 13% to 11% in July 1st 07, and the reduction of tax rebate rate from 11% to 5%" for viscose fiber and finished products, reflecting that the industry still has a good downward pfer capability in the current stage.

Further analysis of the export structure of the industry reveals that the incremental price reduction and the increase in unit export prices are the main driving force for the growth of the export volume of the industry.

According to statistics, in 2005, 2006 and the first half of 2007, the export price of China's textile and clothing products increased by 2.43%, 15.36% and 10.17% compared to the same period last year.

The continuous improvement of unit price of export products also reflects the ability to optimize the overall export structure of the industry and shift the cost pressure to the downstream.

However, we believe that the impact of the export tax rebate rate reduction has a gradual release process. With the accelerated pace of RMB appreciation, the growth rate of industrial exports has declined in the past 08 years.

In the pformation of innovation, we believe that we still need to see and fully understand the advantages of the industry itself and the external favorable factors for the development of the industry.

With the continuous growth of the domestic economy and the continuous improvement of residents' disposable income and the accumulation of wealth, the stimulating effect of the textile and garment market will continue to increase in the future. The world economy is still in the ascendant space, which will effectively support the continuous growth of China's textile and clothing exports. China's textile industry has a very complete industrial chain. China is the largest cotton and chemical fiber producing country in the world, and has abundant raw material resources. China has many developed industrial clusters, which provides a good foundation for the professional division of labor, cost savings and the improvement of upstream and downstream matching capabilities.

It is these factors that constitute the solid foundation for the competitiveness of China's textile industry. China's textile and garment industry has a high degree of marketization and has experienced many years of competition, so it has better self adjustment ability to deal with market risks.

It is particularly necessary to point out that under the pressure of the industry, a group of excellent textile and garment enterprises represented by listed companies have embarked on the exploration of industrial pformation and new business in the past few years.

These include the expansion and extension of the upstream and downstream industries, the diversification of industries, the diversification of industries, the expansion of the marketing market from exports to domestic sales, the penetration of production links to the brand and retail sectors, the increase of R & D investment and the introduction of new products and the development of new products to obtain more lucrative profit margins. Some early pformation enterprises have made some achievements, such as YOUNGOR, seven wolves, Weixing shares, Rebecca and so on.

In the other 07 years, the exploration of some new business models has also attracted wide attention from the industry, and is expected to become a new path for future industry development mode.

Typical PPG direct clothing network direct sales mode.

As for the development trend of the textile and garment industry in 2008, we still believe that.

The joint role of internal and external pressures will push the industry to slow down, and reflect on the extensive nature under the rapid growth of early stage, and urge the industry to achieve pformation and upgrading through technological innovation, brand and channel construction, and ultimately improve the overall development environment of the industry and enhance the competitiveness of the industry.

From 08 years, the industry will enter a steady growth stage from the early stage of rapid growth. Taking into account all the positive and negative factors mentioned above, we initially expect that the growth rate of industry revenue, gross profit and export volume will decrease to 15%, 20% and 15% respectively in 08 years.

In view of the continuous adjustment of product structure in the industry, R & D, the increase of value-added products brought by the increase in technology and equipment, the increasing pfer of industries to the lower reaches, and the improvement of business management capabilities, we expect that the profitability of the industry will remain stable in the past 08 years, and the possibility of a sharp decline is unlikely.