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1、EquityResearchReport/SectorResearch/Textile&Apparel,Xin Li,to,lndices,2013E Annual Investment Strategy-Textile&Apparel,Remains underreform looming,pressure,with,31 Dec 2012Investment HighlightsShort-term operation of branded apparel sub-sector(brand retail):Enterprises remain under pressure from sal
2、es and inventory and theirrevenue growth will slow down.We project that growth rate of large sizedapparel makers retail sales still can hardly exceed 20%in 2013E and growthrate of their revenue reported in financial statements will pull back to 15%.The sub-sector faces pressure from huge inventory o
3、f spring and summerapparel in 2012.If cold weather and Chinese New Year Festival effect boostsales of autumn and winter apparel,apparel makers will post back-loadedgrowth of revenue and earnings in 2013E.Among all sub-sectors,menswear and footwear operate relatively stably,home textile sub-sector ma
4、y seeclimate recover and leisure apparel sub-sector remains under pressure.Long-term trend for branded apparel sub-sector:pricing regime will bebroken and factors driving corporate earnings will change.“Distributioncosts,operating efficiency,tax and surcharges”have pushed apparel pricesbeyond levels
5、 that consumers can afford so that sales volume growth slowsdown and distributors earn slim profits.The apparel value chain is facingreshaping.“Online channel”has developed rapidly(4-y CAGR at 106%andmarket size of over Rmb300bn).Low prices of apparel distributed via on-linechannel will facilitate r
6、eform of pricing regime although they dont stem from,Brand retail:OUTPERFORM(Reiterate)Processing&manufacturing:NEUTRAL(Reiterate)CITIC Securities ResearchXinghai JuTel:021-68761690Email:Practicing certificate no.:S1010510120059Tel:021-68761700Email:Practicing certificate no.:S1010510120016Rong Wang
7、Tel:0755-23835392Email:Practicing certificate no.:S1010511040003,optimized operation.We project that commercial property prices can hardlyrise further going forward,operating efficiency of apparel enterprises is,Performance,Relative,expected to be enhanced and apparel price tends to be marked up slo
8、wly oreven cut so that product offerings and selling prices in on-line channel and,Brand retail,Processing&manufacturing,CSI 300,physical stores become identical and growth of apparel sales volume will beunleashed.During this process,factors driving corporate earnings growthwill change as well:1)sma
9、ll-sized companies remain well-motivated toexpand through M 2)sizable companies rely more on organic growthdriven by sales volume.At present,some leading players have already,made steps forward in this regard.Processing&manufacturing:timing for an upward inflection point of,Source:CITIC Quantitative
10、 InvestmentAnalysis System,corporate earnings has yet to be observed.Exports of this segment grewby 2%during 1-10M12 and the growth rate declined mainly due to decline ofproduct prices resulting from weak foreign demand and slipping raw materialcosts.Growth rate of this segments exports is projected
11、 to come in at 5%in 2013E.Growth rate of corporate earnings will stay low in 1Q13E and it isexpected to embrace an upward inflection point after mid-2013E if demandturns around.Potential risks.1)If Chinas economic growth continues slowing down in2013E,inventory pile-up and slowing turnover will dete
12、riorate.2)Organicgrowth of apparel companies will not necessarily boost results noticeably inshort term.3)Continually sluggish overseas economy and faster RMBappreciation will add to operational pressure on players in processing&manufacturing segment.Please do read the Disclaimer at the end of the r
13、eport,2013E Annual Investment Strategy-Textile&ApparelSectoral valuation and rating.Brand retail segment has already re-rated to 2012E/13E PE of 16x/13x atpresent,partially reflecting operation risks going forward.We reiterate OUTPERFORM rating.Processing&manufacturing segment has re-rated to 15/12x
14、 2012/13E PE for now and can hardly see any upwardinflection point in short run.We thus reiterate NUETRAL rating.Earnings forecast,valuations and ratings of key companies,Company,Share price(Rmb),11N,EPS(Rmb)12E 13E,14E,11N,PE(x)12E 13E,14E,PEG,Rating,CANUDILO Fashion&Accessories(002656)Dongguan Sou
15、yute Fashion(002503)Beijing Toread Outdoor Products(300005)Fujian Septwolves Industry(002029)Joeone(601566)ZheJiang AoKang Shoes(603001)Lancy(002612)Luolai Home Textile(002293)Jiangsu Jiangnan High Polymer Fiber(600527),35.0218.9513.4915.0014.0416.9720.9034.523.63,1.090.600.300.820.891.141.042.660.2
16、0,1.650.910.501.131.171.371.522.670.28,2.191.300.761.411.251.672.082.900.37,2.901.881.111.751.612.012.693.700.45,323244181615201318,212127131212141313,161518111110101210,121012898898,0.650.480.550.440.690.590.420.730.46,BUYBUYBUYBUYBUYBUYBUYO/WBUY,Source:CITIC Quantitative Investment Analysis System
17、 Note:Closing prices as of 30 November 2012Please do read the Disclaimer at the end of the report,2013E Annual Investment Strategy-Textile&Apparel,Content,Investment Highlights.1Short-term brand apparel trends:Sales and inventory remains under pressure,andrevenue growth expected to slow down.2Indust
18、ry trends:we expect retail sales of large-size apparel enterprises will grow by no morethan 20%in 2013E.2Earnings:revenue growth reported in financial statements may be lower than the growth inretail sales,and a back-end-loaded growth trend is expected.5Sub-sector performance:solid growth in menswea
19、r and footwear,and home textile willhopefully pick up.7Long-term brand apparel changes:price regime will be broken and factors drivingenterprise earnings will change.9,Current apparel prices are too high and“online channels”will become the pushing hands in,breaking the existing regime.9Prices will b
20、ecome more reasonable after system transformation,eventually boosting salesgrowth.12Factors driving enterprise earnings will change accordingly during the process.13Processing and manufacturing:when an inflection point appears in corporate resultshas yet to be seen.162012:weak external demand capped
21、 export growth,and enterprise earnings and operationsworsened from 2011.162013:demand will recover modestly and an inflection point in corporate results has yet to beseen.20Potential risks.22Investment Strategy and Company Reviews.22Segment performance.22Valuation.23Sector ratings.24Investment strat
22、egy.24Top Picks.25Souyute(002503.SZ):performance is expected to grow by 40%+in 2013E and its high-growthpotential will remain unchanged.25,Canudilo(002656.SZ):“the road toward a high-end brand management league”suddenly,becomes open and clear.26Toread(300005.SZ):arranging brands in an orderly fashio
23、n and opening up new space forgrowth.28Septwolves(002029.SZ):high management efficiency ensures a steady growth in the future 29Aokang(603001.SH):industry boom will be maintained and the Company will be affordedopportunities for development.30Joeone(601566.SH):solid management helps to steadily go t
24、hrough short-term trough.31Luolai(002293.SZ):effects of improvement have emerged and the trend is expected tocontinue.32,Please do read the Disclaimer at the end of the report,2013E Annual Investment Strategy-Textile&Apparel,Figures,Fig.1:Brand apparel value chain transformation process.2Fig.2:Month
25、ly growth in apparel retail sales from 2011 to Oct 2012.3Fig.3:Comparison of the cumulative growth in retail sales of social consumer goods andproducts and apparel by enterprises above designated size.3Fig.4:Comparison of the growth in apparel retail sales volume and prices of 200 large-sizeddepartm
26、ent stores.3Fig.5:Comparison of the growth in retail sales of 50 and 100 department store channels andapparel enterprises above designated size.4Fig.6:Difference between the growth in retail sales of apparel enterprises above designatedsize and that of 50 and 100 department store channels.4Fig.7:Gro
27、wth in apparel sales of 200 large-sized department stores by market.4Fig.8:Growth in apparel sales volume of 200 large-sized department stores by market.4Fig.9:Growth in apparel prices of 200 large-sized department stores by market.4Fig.10:Consumer Confidence Index for 2008-2012.5Fig.11:Comparison o
28、f quarterly cumulative YoY growth in GDP and retail sales of large-sizeapparel makers.5Fig.12:Ratio of quarterly cumulative YoY growth in retail sales of large-size apparel makers tothat of GDP.5Fig.13:Volume of orders(and enterprise revenue),actual sales and quarterly inventory.7,Fig.14:Life cycles
29、 of Chinas apparel,home textile and footwear sub-sectors.7,Fig.15:Market capacity of apparel sub-sectors.7Fig.16:Layout of sub-sector competitive landscape(footwear,menswear and home textilehave the best competitive landscape).8Fig.17:Cumulative YoY growth in menswear retail sales of 200 large-sized
30、 department storesfrom 2010 to Sep 2012.9Fig.18:Cumulative YoY growth in home textile retail sales of 200 large-sized department storesfrom 2010 to Sep 2012.9Fig.19:Cumulative YoY growth in footwear retail sales of 200 large-sized department storesfrom 2010 to Sep 2012.9Fig.20:Number of internationa
31、l fast-fashion brand outlets in Mainland China.9Fig.21:Breakdown of a mid-end brand clothing item priced at Rmb400(excluding taxes).10Fig.22:Online apparel shopping market size and YoY growth in 2008-2012E.11Fig.23:Percentage of online apparel sales in total apparel retail sales in China.11,Fig.24:C
32、ost and price comparison for Vancls products.11,Fig.25:Comparison of cost and expenditure of online and physical apparel channels.12Fig.26:Comparison of the growth in apparel retail sales volume and apparel retail price of 200large-sized department stores.13Fig.27:Cumulative growth in national and t
33、extile/apparel exports from 2008 to Oct 2012.16Fig.28:Cumulative growth in textile and apparel exports from 2008 to Oct 2012.16,Please do read the Disclaimer at the end of the report,2013E Annual Investment Strategy-Textile&Apparel,Fig.29:YoY growth in export prices of key textile products for 2011,
34、2H12 and 1Q-3Q12.17Fig.30:YoY growth in apparel export prices for 2011,2H12 and 1Q-3Q12.17Fig.30:YoY growth in export sales of key textile products for 2011,2H12 and 1Q-3Q12.17Fig.32:YoY growth in apparel export sales for 2011,2H12 and 1Q-3Q12.17Fig.33:Percentage of domestic textile and apparel expo
35、rts by region in total for Jan-Sep 2011and Jan-Sep 2012.18Fig.34:Percentage of domestic textile and apparel exports by country in total for Jan-Sep 201218Fig.35:Unemployment rate in the US from 2008 to Oct 2012.18Fig.36:YoY growth in GDP for the quarter of the Eurozone from 2006 to Sep 2012.18Fig.37
36、:Percentage of imported textile and apparel products in total imports of the US one yearbefore Sep 2012.19Fig.38:Percentage of textile products imported from China in total textile imports of 27Eurozone economies as of Jun 2012.19Fig.39:YoY growth in revenue and profit of the textile industry from 2
37、009 to Sep 2012.19Fig.40:YoY growth in gross margin and margin of the textile industry from 2009 to Sep 201219Fig.41:Accounts receivable turnover days of processing and manufacturing enterprises from2007 to Sep 2012(full-year and 3Q).20Fig.42:Inventory turnover days of processing and manufacturing e
38、nterprises from 2007 toSep 2012(full-year and 3Q).20Fig.43:YoY growth in total turnover and textile and apparel export turnover at GuangzhouTrade Fair during the 97 th and the 112 th session.20,Fig.44:Chinas 328-cotton price trends from 2010 to Nov 2012.21,Fig 45:Movement of world cotton inventory-t
39、o-use ratio from FY1995/1996 to FY2012/2013.21,Fig 46:Movement of Chinas cotton inventory-to-use ratio from FY1995/1996 to FY2012/201321,Fig 47:Price difference between domestic and foreign cotton 2010-Nov 2012.22Fig 66:Increase/decrease in the performance of the brand apparel segment Jan 2012-19 No
40、v2012.23Fig 48:Price performance of key brand apparel companies 1 Jan 2012-19 Nov 2012.23Fig 49:Price performance of key processing and manufacturing companies 1 Jan 2012-19Nov 2012.23Fig 50:Comparison of historical PE of the brand apparel segment,the processing&manufacturing segment and the overall
41、 market 2004-11.24,Please do read the Disclaimer at the end of the report,2013E Annual Investment Strategy-Textile&ApparelTablesTable 1:Details of spring and summer apparel order-goods meetings in 2011-2013.6Table 2:Ratio of“apparel price to residents monthly income”across brands of variousgrades Ch
42、ina vs.USA.10Table 3:Three phases of corporate development.13Table 4:Top five apparel brands by T sales on Nov.11 2012(known as the,“Singles Day”in China),.14,Table 5:E-commerce developments of major brand apparel companies.14Table 6:Channel development models and retail of major brand apparel compa
43、nies.14Table 7:Multi-brand strategy of key brand apparel companies in 2012.15Table 8:Earnings forecasts,valuations and ratings of key companies in the sector.25Please do read the Disclaimer at the end of the report,1,2013E Annual Investment Strategy-Textile&Apparel,Investment Highlights,Based on the
44、 current macro-economic condition and consumer confidence expectations,it,is still difficult for the growth rate of large-size apparel makers retail sales to exceed 20%,in 2013E.Given the increase in channel inventory,revenue growth of some enterprisesmay be lower than the sectoral average.Among the
45、 sub-sectors:menswear and footwearwill be relatively stable,home textile may see climate recovery,and competitive pressureis expected to remain for leisure apparel.,More importantly,continuous consumption pressure will lead to the reshaping of Chinasexisting“brand apparel value chain”.Currently,“dis
46、tribution cost,operational efficiencyand external taxation”in the brand apparel operational and distribution process have,pushed clothing prices beyond levels that consumers can afford.In the meantime,consumption pressure also put constraints on sales,resulting in the deceleration in sales,growth an
47、d the decline in distributors profits,hence affecting their outward expansion.,“Online channels”are the primary driver accelerating the reshaping of the apparel value,chain.Being one of the retail practices,they are essentially a supplement to-instead of a,replacement of the brand apparel distributi
48、on channels.Their great impact at present is,mainly attributable to the fact that online product prices in general are significantly lowerthan those of physical channels.We believe the low prices of online channels primarily,result from“inventory clearance by traditional brands”or“Tmall brand low-pr
49、ice marketingstrategy”.However,no doubt they will promote changes in the existing apparel price,regime.There are two possible routes for change:1)decline in apparel prices driven byfalling distribution costs and improving operational efficiency;2)product innovation andgreater branding efforts afford
50、 apparel products better value for money and thus prices aremore acceptable for consumers.Overall,we expect apparel prices as a whole will increaseat a slower pace and may even be gradually reduced,so that product offerings and sellingprices in the on-line channels and physical stores tend to be ide
