Garment Industry: Sustained Growth And Value Creation

2011 semi annual preview and second half outlook

2011 semi annual Preview:

In addition to the sports sub sectors, the apparel industry maintained a good growth in the first half of the year. The volume and price of Brand Company rose and the gross profit margin improved. The average growth rate of net profit could exceed 40%.

Operating profit growth of more than 40% of the following: fuanna, Luo Lai, good news birds, nine herdmen, the United States and Hong Kong shares doctoral frog; more than 30% of: Meng Jie, seven wolves, Semir, Lu Tai A, Hong Kong stock, Li Kong; Hong Kong stock BELLE in the high base can achieve more than 30% of pre tax profit growth, very good. Hong Kong stock movement Lining and China's trend declined year-on-year, mainly due to the substitution of leisure and fashion brands.

Focus:

Autumn and winter of brands Order-placing meeting Orders are full, with an average growth of 2011 over 40% guaranteed. Home textile orders grew by 50% over the same period, while casual men's clothing grew by more than 30% over the same period. The second half of this year can maintain a good growth in the first half of the year, and the average brand clothing industry will exceed 40% annually.

Sub industry differentiation is obvious in different stages of brand development. Industries in the first stage (branding stage) (such as home textiles, leisure, men's wear, children's wear).

Performance is good, development potential is great; in the second stage (brand competition stage) industry (such as sports) excessive competition, performance slowdown / decline; in the third stage (brand win stage) industry leader (such as women's shoes industry BELLE) performance has maintained steady growth.

Demand determines industry growth, home textiles, leisure and men's wear better. Domestic wage promotion to promote consumption upgrading, clothing subdivision trend is obvious, leading to the rapid growth of sub industry demand. In the first stage, the quality companies can grow faster than the industry average, and will maintain more than 30% growth in the next two years.

Valuations and recommendations: pay attention to 2012 P / E, bargain intervention in healthy growth stocks

A shares: can focus on men's wear seven wolves (2011/12PE:27x/20x), 26x/20x and leisure brands. Smith Barney (27x/20x) Semir (28x/21x) can maintain a growth rate of more than 30%, and the valuation is more reasonable. The valuation translations in the next 12 months can bring about a 30% rise. We are still optimistic about the fundamentals of the home textile industry, but the 2011PE of the three companies is over 30 times, which has a certain valuation pressure in the short term, but it is still a good target for long-term investment.

Hong Kong stocks: focus BELLE (25x/19x), 18x/13x (18x/12x), low valuation and significant features.