China Securities Co., Ltd. Light Textile and Apparel 2026 Mid-Term Investment Strategy: Where are the opportunities in the second half of the new consumption era?

China Securities Co., Ltd. released a research report, looking forward to the second half of 2026, and seizing the investment opportunities in the light textile new consumer sector. They suggest starting with the following: 1) Transformation of traditional industries: - Improving the product strength of gold jewelry, high-end domestic goods entering high-end channels, gradually replacing foreign high-end jewelry. - The enhancement of health awareness driving the home textile industry towards sleep solutions, with AI mattresses helping soft home furnishings achieve new growth points. 2) Breakthroughs in emerging technologies: - Traditional lens companies utilizing accumulated experience in the optical field to participate in customized lenses for AI glasses, optical components, etc. - Rapid penetration of the consumer-level 3D printing market, with plastic product companies getting involved in consumables. - AI chip cooling crisis driving a material revolution, with diamonds transitioning to chip-level cooling materials. 3) New changes in tobacco policies, IP toys going overseas: - Initiation of new tobacco national standards in China, FDA in the US approving flavored e-cigarettes for the first time. - New trends in IP toys in China and outbound strategies leveraging Chinese manufacturing advantages for breakthroughs. Key points from China Securities Co., Ltd.: Looking back at 2025, in a context of weak overall consumption sentiment and internal differentiation, new consumer companies are using innovation on the supply side to meet and create new demand, achieving nonlinear growth. Starting from the second half of 2025, the market experienced a downturn, with sustainability challenges for some industries high in growth, and increased internal differentiation in new consumer sectors. In the beginning of 2026, with the background of the wealth effect in the stock market, they are optimistic about the investment opportunities for the recovery of high-end consumption. Looking forward to the second half of 2026, there are still investment opportunities in new consumer sectors, and they recommend focusing on: 1) Deep transformation of traditional industries: - Gold jewelry industry: revisions in technical standards bringing more possibilities for gold jewelry, upgrades in craftsmanship promoting significant product strength improvement, domestic ancient technique gold becoming popular in high-end channels, and domestic high-end gold brands gradually replacing foreign jewelry. - Healthy sleep: Rising national health awareness reshaping the industry, shifting the home textile industry from traditional products to sleep solutions, with the industry competition focusing on product innovation and brand premiums, leading to an increase in market share for top enterprises. In addition, the rise of AI mattresses is helping leading companies achieve excess growth. 2) New technology breakthroughs bring new demands: - AI/XR glasses: AI audio/camera glasses without displays rapidly gaining popularity in applications such as personal AI assistants and first-person camera shots. With the development of waveguide technology, AI+AR glasses with displays are gradually maturing, improving user experience in translation, navigation, entertainment, etc. Traditional lens companies are participating in the customization of lenses and optical components for AI glasses using their optical expertise. - 3D printing: With advancements in AI and 3D printing technology, the barrier to 3D modeling is lowering and the quality of printed products is improving. Consumer-level 3D printing is rapidly permeating the market, expanding from creative design corporations to Steam education, personal hobbies, etc. The increase in consumer-level 3D equipment will drive demand for consumables, and plastic product companies are expected to leverage modified materials technology to participate in the 3D printing consumables segment. - Artificial diamonds: The cooling crisis of AI chips is driving a material revolution, as diamonds move beyond traditional grinding and cultivation into the realm of functional diamond materials (fourth-generation semiconductor materials, ultra-large power device cooling materials), leading the way in high thermal conductivity cooling materials and thermal management revolution. 3) New changes in tobacco policies, IP toys going overseas: - New tobacco: Major policy changes in domestic and overseas markets, with the initiation of mandatory national standards for "heated cigarettes" and "nicotine pouches" in China. In May, the FDA in the US approved flavored electronic vapor products with adult recognition technology for the first time. - Since the second half of 2025, the hype around IP toys in China has cooled down. In the future, the development of original IP toys needs to strengthen content development and emotional connection. The outbound strategy relies on well-established overseas IP toy growth paths, with tremendous potential for leveraging Chinese manufacturing, play methods, and category creativity advantages. Risk factors: 1) Risks to brand image: Brand strength is an important source of premium in many companies mentioned, as well as a core competitive advantage of companies. Inappropriate behavior in marketing, product design, or quality, or negative events, may damage the brand, impacting the company's operations negatively. 2) Fluctuating raw material prices: Recent increases in the prices of bulk raw materials may affect the costs and profitability of some companies. 3) Intensification of industry competition: Increased competition in various sub-sectors may lead to a decline in industry average profit margins, thus affecting the uncertainty of company operations and performance. 4) Unmet consumer demand: The current operating environment and supply chains in domestic and foreign markets are facing uncertainties, potentially affecting the achievement of company production and operating objectives. 5) Risk of changing toy trends: IP trends change rapidly, and companies that fail to cooperate with IP loved by consumers or develop new products that meet consumer needs in a timely fashion may impact the company's performance and growth.