Guosen: Brand consumption growth stabilized in the fourth quarter, and the high prosperity of textile manufacturing continued.

Guosen released a research report stating that the textile and clothing sector of A shares fell by 1.5% in December, underperforming the overall market, while the textile and clothing sector of Hong Kong shares was basically in line with the market. In the report, it was mentioned that the sales growth of various brand apparel in the fourth quarter showed a significant improvement compared to the third quarter, and the sector's full-year performance is expected to be relatively stable. The textile manufacturing sector maintained high buoyancy in the fourth quarter, with high realization of annual performance and strong fundamentals expected to continue to catalyze growth. Additionally, the devaluation of the renminbi in the fourth quarter exceeded expectations, benefiting some companies in terms of product unit price and exchange gains. Key points from Guosen are as follows: Market Review: The textile and clothing sector of A shares fell by 1.5% in December, underperforming the overall market, while the sector in Hong Kong shares was basically on par with the market. Companies like Hla Group Corp., Winner Medical, and TOPSPORTS experienced an increase of over 20% in their share prices in both A shares and Hong Kong shares; companies like Biem.L.Fdlkk Garment, JNBY, PRADA, STELLA HOLDINGS, and PACIFICTEXTILES had an increase of over 10% in their share prices. Brand Apparel Viewpoints: Retail sales of clothing in October and November increased by 1.1% year-on-year, showing a significant improvement compared to the third quarter. E-commerce platforms, outdoor clothing, and home textiles showed rapid growth in October and November, with double-digit growth in women's clothing and home textiles. The sales growth of various brands in December showed further improvement compared to the cumulative growth in October and November, indicating a stabilization in the performance of the brand apparel sector in the fourth quarter. Textile Manufacturing Viewpoints: Vietnam's Purchasing Managers' Index (PMI) fell in December, while China and Indonesia's PMI increased. The export of textile products and footwear in Vietnam showed high growth in November, with a year-on-year increase of 17.4% and 19.9% respectively; China's textile product exports increased by 9.3% year-on-year in November. The textile prosperity index in Keqiao district increased year-on-year in November but decreased compared to the previous month; the machine operating rate in Shengze district was 75.4%, with a slight drop compared to the previous month. In terms of contract manufacturing Taiwanese companies, most companies achieved year-on-year revenue growth in November, with shoe manufacturer YUYUAN seeing a 17% increase in revenue. Fourth Quarter Performance Outlook: 1) Brand Apparel: There was a clear improvement in the sales growth of brands in the fourth quarter compared to the third quarter, and the performance outlook for the full year was well adjusted after the release of third-quarter reports in late October; the sales growth of brands in the fourth quarter was in line with expectations at the time. 2) Textile Manufacturing: Orders for textile manufacturing companies remained strong in the fourth quarter, with high realization of annual performance and most companies seeing double-digit growth in performance for the full year. Additionally, the depreciation of the renminbi in the fourth quarter exceeded expectations, benefiting most manufacturing companies in terms of product unit prices or exchange gains. Investment Recommendations: Focus on new highlights in the brand sector and undervalued opportunities in Hong Kong shares 1) Brand Apparel: Sales growth of various brands in the fourth quarter showed a clear improvement compared to the third quarter, with performance outlook relative to full-year revisions after the release of third-quarter reports. Key recommended companies with new highlights for 2025 including Winner Medical (300888.SZ) starting a brand momentum in the era of all cotton, Hla Group Corp., (600398.SH) exploring new growth curves at JD Outlet, Zhejiang Semir Garment (002563.SZ) actively expanding channels, and Hong Kong-listed valued sports companies with good medium-term growth potential such as ANTA SPORTS (02020), LI NING (02331), TOPSPORTS (06110), and leading home textile company Shenzhen Fuanna Bedding and Furnishing (002327.SZ). 2) Textile Manufacturing: The textile manufacturing sector maintained high buoyancy in the fourth quarter, with strong fundamentals expected to continue to catalyze growth. Additionally, the depreciation of the renminbi in the fourth quarter exceeded expectations, benefiting some companies in terms of product unit prices or exchange gains; considering the sustainability of growth, it is recommended to focus on companies with the ability to increase market share and strong long-term growth. Key recommended companies include leading sports contract manufacturer SHENZHOU INTL (02313), Huali Industrial Group (300979.SZ), and leading companies in the niche manufacturing segment Zhejiang Weixing Industrial Development (002003.SZ), Zhejiang Jasan Holding Group (603558.SH), and Anhui Korrun (300577.SZ). Risk Warning: Weak macroeconomic conditions; international political and economic risks; significant fluctuations in exchange rates and raw material prices.