The pressure of 2019Q1 in the textile and garment industry is still in progress, and the overall growth rate is adjusted year-on-year.

The 2019Q1 textile and garment industry is still under great pressure. The pressure on brand apparel Q1 is still in progress, and the overall growth rate is adjusted year-on-year; the three elements of the processing and manufacturing sector are weak, the cotton price is stable in the short term, the exchange rate is fully reflected, and demand is slowing down.

Last week (2019.03.25-2019.03.31) textile and apparel underperformed Shanghai and Shenzhen 300 (+0.45% VS +1.01%), ranking 9th among CITIC's 29 industry classifications. Among them, brand apparel and textile manufacturing were up and down by +1.46% and -0.48% respectively.

Brand apparel: 2019Q1 pressure is still in progress, the overall growth rate is adjusted year-on-year. On a monthly basis, the overall sales were better under the influence of the Spring Festival in January, but the growth rate slowed down in February (the low season after the Spring Festival). The expected growth rate in March was improved from February, but considering the overall apparel consumption in March last year. High growth, the pressure in March this year is not small. From the perspective of overall consumption trends, the economy will decline in the second half of the year and consumption will weaken in the second half of 2018. The impact time and impact of the apparel sector in the down cycle are in the middle reaches of the consumer sub-sectors. The domestic brand clothing industry has not completed the leading screening process, and each segment has a greater correlation with the economic cycle. The leading companies in the industry have weaker cycle resistance than most consumer sub-sectors. According to our estimates, the average revenue and net profit growth centers of key brand companies have fallen from double digits to single digits (excluding the consolidation factor). The main reasons are: (1) the high base of the multi-factor combination of 2018Q1; (2) the decrease in the number of spring festival days in 2019, which is also the reason for the general decline in consumption in February 2019; (3) the weather of January-February 2019 Warmer than the same period in 2018. (4) Overall consumption was weaker than the same period last year.

Processing and manufacturing: cotton prices are stable in the short term, the exchange rate is fully reflected, and demand is slowing down. The three elements of the 2019Q1 impact sector are still relatively weak, with cotton prices falling slightly in the short-term and relatively difficult to rise. The exchange rate elasticity is less than before; while internal and external demand is slowing down overall. We judge that the key companies' orders in the first quarter are generally flat.

Risk factors: 1. The macroeconomic growth rate slows down; 2. The capacity expansion is less than expected, cotton price fluctuations, etc. 3. The overseas economic downturn and the accelerated appreciation of the renminbi will increase the operating pressure of processing and manufacturing enterprises.

Investment Strategy. (1) Find potential leaders in the sub-sectors that are underestimated and have core competition barriers. They are gradually configured and held in the process of reasonable valuation or wrong killing: focus on ANTA Sports, Senma costumes, and pay attention to Haitang House and Taiping Birds. , Song Lisi, Jiangnan cloth, Li Ning, Anzheng fashion. (2) Finding the sub-areas and companies that are resistant to the economic cycle, and paying attention and layout for a long time, Shenzhou International (the best quality supplier), Kairun shares (successful transformation of brand owners, the ultimate product card increment market), short-term recommendations Pay attention to the printing and dyeing leading stockholders' shares with higher price and benefit valuation.