CMSC: Export manufacturing prosperity continues, looking forward to the recovery of high-quality mid-to-high-end brands by 2025.

CMSC released a research report stating that outdoor activities continue to be prosperous, and outdoor and sports performance is expected to outperform traditional apparel by 2024. Looking ahead to 2025, with continuous incremental policies, consumer spending is expected to rebound, and there is hope for the revival of high-quality mid-to-high-end brands. From the manufacturing side, external demand is steady, textile and apparel exports are stable and improving, and international brands are continuously pushing for product, channel, and supply chain optimization. In the future, high-quality manufacturing leaders that meet brand and market demand changes are expected to continue to increase market share. CMSC's main points are as follows: Brand Apparel Sector Outdoor activities continue to be prosperous, consumer spending is expected to pick up, and high-quality mid-to-high-end brands are expected to revive. Looking back at 2024, the outdoor sector (+14.81%) and sports footwear and apparel sector (+11.33%) had the highest growth rates, the home textile sector maintained growth (+7.41%), while mid-to-high-end women's wear (-1.46%) and men's wear (-17.33%) sectors were under pressure. Mass market brands (+17.94%) performed better than mid-to-high-end brands (-4.35%). Looking ahead to 2025, with continuous incremental policies, consumer spending is expected to pick up, and high-quality mid-to-high-end brands are expected to lead the way in revival. The high prosperity of mid-to-high-end outdoor activities, brand expansion of products and channel expansion have achieved contrarian growth. Looking at the revenue growth of outdoor brands since 2024, Yama Fun's revenue in the Greater China area increased by 54% in 24Q1-Q3, Ang Pao's revenue in the Asia-Pacific region increased by 86% in 24Q1-Q3, Decathlon's China retail increased by 42% in 24H1, and BOSIDENG brand FY25H1 (April-September 24) increased by 19%. The main reasons for the high prosperity of mid-to-high-end outdoor activities are: changes in the consumption tendencies of entrepreneurial middle-class consumers, seeking luxury alternatives (since 2024, luxury sales in the Chinese market have been continuously weakening, with 24Q3 sales of Hermes +1%, LVMH -16%, Richemont -18%, Kering -30%); Brands expanding product categories while retaining product functionality, focusing on urban commuting and fashionable dressing, catering to consumers' multi-scenario dressing needs; High-end outdoor brands offline store layout mainly in core business districts of first and second-tier cities, with a higher overlap with luxury brands, and brands continue to accelerate Wuxi Online Offline Communication Information Technology Co., Ltd. channel expansion. Sports footwear and apparel sector performance is stable, showing some resilience. Since the beginning of 2021, prompted by the cotton event, it has ushered in the trend of Chinese national brand prosperity. In 21Q1, many brands achieved a growth of over 40%, but after experiencing the impact of the pandemic fluctuations and lack of consumer willingness, terminal consumption has been under pressure since 2024, with various brands maintaining single-digit growth or experiencing a slight decline, showing some resilience. We look forward to brands regaining confidence in growth after healthy recovery of channel inventory. Since 24Q2, men's and women's wear has been under pressure, with competition worsening due to the influence of white label brands. In 24Q1, revenue of men's and women's apparel companies was able to maintain growth, but in 24Q2-24Q3, they showed pressure and revenue declined. The growth rate of Pinduoduo and TikTok channels was faster, and prices moved downward (in November 2024, the proportion of sales of products priced below 79 yuan on TikTok increased by 9% year-on-year, while the proportion of sales of products priced above 399 yuan decreased by 7%), intensifying online white-label competition. Textile and Manufacturing Sector Looking back at the textile and manufacturing sector from the beginning of 2024, driven by the demand for racing repairs, leading orders and valuations in the textile and manufacturing sector have continued to recover, with an average increase of 61% in garment and footwear manufacturing sectors (footwear reaching 72% and garments reaching 53%), accessories increased by 25%, and upstream yarn sector remained flat. Looking ahead to 2025, external demand is steady, but more specialized, international sports leaders continue to innovate, and high-quality manufacturing leaders that meet brand and market demand changes are expected to continue to increase market share. Industry Analysis: Textile and apparel exports & manufacturing orders are good, and external demand is expected to continue to grow steadily Since 2024, retail sales growth of apparel and accessories stores in the United States has remained at low to mid-single-digit levels year-on-year, showing a seasonal upward trend. Export of clothing and footwear from Vietnam and Cambodia is stable and improving, with overseas demand expected to be relatively steady. Q4 manufacturing leaders grew steadily (slightly slower growth than in the third quarter), with Ru Hong's revenue growing by +6% in October and November 2024 (Q1 +17%, Q2 +23%, Q3 +26%); Fengtai's revenue remained steady (Q1 +6%, Q2 +7%, Q3 -2%). Future Outlook: Brand reforms are in full swing, and high-quality manufacturing market share is expected to continue to increase Since 2024, traditional sports brands (Nike, Adidas, etc.), emerging brands (HOKA, ON, etc.), luxury and high-end fashion brands (miumiu, BottegaVeneta, etc.) have continued to launch retro, outdoor, and sports fashion footwear, looking from the perspective of next year, sports + fashion categories are expected to grow rapidly. From the supply chain perspective, brands are introducing high-quality suppliers and continuously increasing the share of core suppliers to improve supply chain efficiency. Suppliers that meet brand and market product demand changes in the future will gain more market share. Investment Suggestions Brand side: Focus on brands with historical low valuations (10X-15X), upward momentum in categories (functional apparel), low inventory levels in channels, and strong channel influence (improved store locations, increased store size, upgraded store types, net increase in quantity): multi-brand sports leader ANTA SPORTS (02020), outdoor functional apparel brand BOSIDENG (03998), mid-to-high-end men's apparel brand Baoxiniao Holding (002154.SZ), mid-to-high-end home textile brand Shenzhen Fuanna Bedding and Furnishing (002327.SZ), etc. Manufacturing side: Focus on high-quality manufacturing leaders in the outdoor, running, and sports fashion sectors who have advantages and can continuously optimize customer and order structure: footwear leader Huali Industrial Group (300979.SZ), accessories leader Zhejiang Weixing IndustIndustrial Development (002003.SZ) and sports fashion shoe manufacturer STELLA HOLDINGS (01836) are leading the way in their respective industries.Risk warning: risks of insufficient domestic demand, risks of excessive inventory, risks of manufacturing order pressure due to insufficient external demand, risks of overseas manufacturing capacity expansion and release not meeting expectations.