Shenwan Hongyuan Group: The textile and clothing sector ushered in a low-level layout window, and the recovery of the industrial chain will gradually be connected.

Shenwan Hongyuan Group released a research report stating that from January to February 2026, both domestic consumption and export demand for textile and clothing exceeded expectations. Currently, the fund's heavy position ratio is low, creating a window for low-level layout in the sector. In terms of textile manufacturing, the stronger the cycle, the stronger the growth. It is optimistic about upstream price increase varieties and is paying attention to the recovery of sports manufacturing. 2026 is expected to be a turning point year for the clothing and home textile industry, focusing on future consumption trends and finding directions with penetration space. Looking ahead to the first half of 2026, the bank judges that upstream prices will rise, the middle stream will be under pressure, and downstream differentiation will occur, gradually connecting the recovery of the industry chain. The main points of Shenwan Hongyuan Group are as follows: Textile manufacturing: After the industry reshuffle, the stronger the cycle, the stronger the growth. Optimistic about upstream price increase varieties and focus on the recovery of sports manufacturing. During the upstream price increase cycle, Australian wool and American cotton have both seen price and quantity rise: over the past few years, low prices have triggered production cuts, with Australian wool cutting production by over 20% in the past two years, and global cotton may also see a year of production cuts in 2026. Supply contraction and demand recovery are expected to drive the price increase cycle. Since the resumption of trading at the end of August 2025, the price of Australian wool has increased by 52%, which has truly promoted the simultaneous increase in order quantity and price. Looking ahead, cotton prices are also expected to follow a similar path, with global suppliers who have ample low-priced materials having great performance elasticity. Companies recommended include Bros Eastern Co., Ltd. For middle stream sports manufacturing, there is short-term pressure, but new growth is brewing in the medium to long term: Global tariff games combined with geopolitical conflicts have sparked demand uncertainty, leading to a weakening of downstream orders in the latter half of 2025, hindering the profit margin recovery process of large sportswear manufacturers still expanding production. The bank believes that the recovery is still in progress in 2026, but the strength of the recovery still depends on the recovery pace of Nike, a core downstream customer. Nike is gearing up for a new round of innovation, benefiting the industry chain in the medium to long term. Recommended companies include SHENZHOU INTL/ Huali Industrial Group/ YUE YUEN IND/ Zhejiang Weixing Industrial Development, with a suggestion to pay attention to CRYSTAL INTL. Clothing and home textiles: 2026 is expected to be a turning point year for consumption. Focusing on future consumption trends, look for directions with room for penetration. High-performance outdoor wear, currently low penetration rate, high space in the future: The market size of high-performance outdoor clothing in China in 2024 was 102.7 billion yuan, a year-on-year increase of 17%. The market share of the top 10 brands is only 27%, and the headroom has not been determined yet. Recommended companies include LI NING/ ANTA SPORTS/ BOSIDENG/ 361 DEGREES/ TOPSPORTS/ TESLA, with a suggestion to pay attention to Bo Xihe, which has submitted an H-share IPO prospectus. Social wear, tourism and business scenes promoting the return of high-end consumption: The demand for high-end clothing is related to travel activities. In the past few years, the destocking and channel adjustments have been completed, and signs of recovery have appeared. Recommended companies include Biem.L.Fdlkk Garment/ Shenzhen Ellassay Fashion, with a suggestion to pay attention to JNBY/ Jinhong Fashion Group. Sleep economy, a market worth billions constantly nurturing explosive home textile products: From the best-selling down comforters in 2023 to the explosion of ergonomic pillows and functional bed sheets in 2024-25, the acceptance of young consumers is rapidly increasing, creating market growth. Recommended companies include Luolai Lifestyle Technology/ Shanghai Shuixing Home Textile. Risk factors: Consumption recovery is lower than expected; increased market competition; tariff risks; exchange rate risks; fluctuation in raw material prices.