“Most people like to grow, but I like thresholds. Growth is the future, and it is difficult to predict; the threshold is well-established and easy to grasp. With high threshold industries, new entrants are unlikely to survive. Therefore, the supply of the industry is limited, competition is orderly, and it is beneficial to enterprises. Profit growth, low threshold industry, rapid growth in industry supply, and disorderly competition, no one can make money."

Last year, the main line of Hong Kong stocks was mainly high-growth growth stocks. Popular sectors such as technology, autos, real estate, and insurance were frequent investors. Several large white horse stocks like China Ping An, Tencent, and domestic giants can do “open for three years” as long as they can easily catch one.

But when it comes to the end of the year, some of them may not seem so popular, but industries that we often come into contact with in our lives, such as the food and beverage industry, have not experienced a burst of growth and revolutionary technological innovation. However, several leading companies have also come a long way. Great city's good results. Like Mengniu and Daly Foods, the increase in 2017 was as high as 56% and 85% respectively.

In my opinion, this is the market gradually agrees that the industry has now undergone a brutal expansion. After years of competition, the big leading companies are relatively more capital, channels, talents, resources and other advantages. Passive shake, that is, there is a threshold, it is worth a higher valuation.

Recently, I was wondering if the same situation would happen to another industry that we can normally reach. For example: "clothing, food, housing, transportation" ranked first "clothing", textile industry?

Judging from the stock price, the stock price trend of the textile industry varies from year to year. The leader such as Shenzhou International (hereinafter referred to as “Shenzhou”) has gained as much as 50% this year, while the share price of Pacific Textiles is negative.

What is happening in the textile industry and what should we expect in the coming year? Before analyzing this investment opportunity, let us briefly look at the industry profile.

First, relying on downstream retail customer orders, the industry concentration is low

The entire textile industry supply chain includes upstream yarns, cotton textiles, midstream fabrics, and downstream clothing and garment manufacturing companies. The biggest factor affecting the profitability of textile companies is downstream retail customers.

As mentioned in the articles of the Pacific Textiles that we have analyzed on the platform, the company’s main customer, Weimin’s 17-year sales decline (accounting for 10% of total revenue in 2016), led to a decrease in the company’s order revenue, which eventually led to earnings and stock prices. Decline.

In the textile industry, any turmoil from downstream retail customers will have a significant impact on textile companies.

The concentration of this industry has historically been low. Although the previously mentioned ET Textile can be regarded as one of the leading players in the industry, it is only one of the many mid-sized fabric textile companies in China, with a very low market share.

What is the trend of the textile industry now? What opportunities will this bring to investors?

Second, 2018: Big fish eat fish, moat further strengthen?

Simply put, under the influence of the country’s vigorous reform, domestic manufacturing costs, and new consumer trends, China’s textile industry is expected to gradually expand its market share and take a leading position among the leading players in the midstream and downstream industries. The entire industry is facing reshuffle, and the industry concentration is expected to increase.

why?

Keywords 1: Environmental protection costs

First of all, the state has always had the policy requirement of eliminating backward production capacity for textile enterprises at the supply end. Strict environmental protection standards will shut down some SMEs.

At the Central Economic Conference, Xida again reiterated that it is necessary to lay a solid battle for pollution prevention and control, so that the total discharge of major pollutants will be substantially reduced, the overall quality of ecological environment will be improved, and backward production capacity will be eliminated.

As early as 2010, the country began to issue a number of policies to eliminate excess manufacturing capacity. The state's control over the production capacity of the textile industry is mainly to improve technology and environmental protection standards, which will increase the environmental protection costs of many textile manufacturing enterprises.

Therefore, without certain scale benefits, many small businesses will face the pressure of rising costs.

Keywords 2: labor costs

Second, in recent years, domestic labor costs have been rising rapidly. Some attentive friends may have noticed that the “MadeinChina” label on many branded clothes has gradually become the name of some Southeast Asian countries.

This is because with the appreciation of the renminbi and the increase in domestic labor costs, many leading textile companies have set up factories in Southeast Asia such as Vietnam and Cambodia to expand their production capacity to enjoy more favorable tax rates and lower manpower costs. It is believed that it is difficult for small enterprises to set up factories overseas without certain financial strength and resources.

Keyword 3: Shorten production cycle

Lastly, the main reason for promoting further industry concentration is that in the past few years, changes in the clothing retail market have made major apparel brand companies have higher requirements for suppliers.