Textile manufacturing continues to pick up in the third quarter

As winter approaches, temperatures throughout the country have dropped significantly. Analysts believe that the change of season brings to the textile and apparel listed companies to bring room for improvement in their operations and performance. At the same time, they also provide trading opportunities for individual stocks in the sector.

Since the fourth quarter, the textile and clothing (Shenwan first level) index has performed as a shock consolidation, accumulating 1.94 percent from October 1 to November 18, and outperforming the Shanghai Index by 0.9 percentage points over the same period.

Judging from the performance of individual stocks, the ups and downs of individual stocks since October have been met with heavy losses. Among the 76 stocks in the normal trading sector, 39 stocks have risen, accounting for 51.32%, of which, as many as 11 stocks have gained more 10% were: Fujian Nanfang (74.33%), Caesars (28.35%), Xingye Technology (27.67%), Jiangsu Minda (17.35%), Fengzhu Textile (16.47%), Jinfeida (16.46%) , Lianfa Group (14.45%), Keno Technology (13.74%), Semir Clothing (11.88%), Maibang Fashion (11.82%), Youngor (11.37%).

From the perspective of capital flow, only 19 textile and apparel stocks have shown a net inflow since October, accounting for a quarter of the normal A shares of the industry. Among them, the top ten stocks of capital inflows are: (46,642,200 yuan), Meibang Garments (45,445,300 yuan), Chinese clothing (422,279,500 yuan), one hundred yuan pants industry (374,420 yuan), Pathfinder (331,186,800 yuan), Lu Tai A (3,011,300 yuan), Kaikai Industrial (27,803,400 yuan), Huafang Stock (23,823,100 yuan), Blue Ding Holdings (2003.24 million yuan), and Dayang Creation (1983.95 million yuan), total net inflow of 330 million yuan.

From the performance point of view, textile and apparel sub-sectors of textile manufacturing and home textiles in the third quarter of differentiation.

Textile manufacturing continued to pick up in the third quarter. In the first three quarters, textile manufacturing revenue increased by 4.2%, net profit increased by 38.69%, and net profit after non-operating profit and loss increased by 94%. In the third quarter, revenue from textile manufacturing increased by 4.63%, net profit increased by 89.56%, and net profit after non-operating profit or loss increased by 147%.

The third quarter of apparel textile industry performance has deteriorated, and its sub-sectors have become more differentiated. In the first three quarters of the apparel textile industry, operating income recorded a slight increase, with a year-on-year decrease. The net profit continued to decline, and the decline rate increased. In the first three quarters of 2013, the operating income of the apparel home textile industry increased by 6.79%, net profit decreased by 6.34%, and net profit after deducting non-operating profit and loss decreased by 0.5%. Outdoor garments thrive; women's and home textiles achieved slight growth, but their performance growth rate was lower than expected, and the growth rate of the third quarter decreased; menswear and footwear performance continued to deteriorate; casual wear performance continued to decline.

Regarding the investment strategy for the textile and apparel segment, Dongguan Securities’ latest research report stated that the 2013 annual performance of the textile manufacturing sub-sector is expected to maintain its recovery trend. The direct cotton subsidy policy is expected to be implemented in the second half of 2014. The cotton price gap between domestic and overseas is expected to continue to shrink; exports are expected to continue to pick up, and the industry is expected to maintain its recovery trend. Maintain a cautious recommendation rating on the sector. Recommended Lutai A, Huafu Spun, Blum Oriental. Regarding the garment home textile sub-sector, analysts believe that it is possible to focus on the valuation enhancement opportunities of Semima Garments, Smith Baron, Rollei Home Textiles, Rich Anna, Pathfinder, etc., which are expected to be the first to complete destocking.