Orient: The market is paying more attention to the traditional sectors, focusing on the structural opportunities in the textile and clothing fashion sector.

Orient released a research report stating that it is advisable to pay attention to fashion stocks in the textile and apparel sector with good fundamentals. With the recent changes in the market, there has been increased focus on traditional sectors. The bank believes that although there are currently no systematic opportunities arising from overall fundamental recovery in the sector, there are still some companies within the sector with good future prospects and relatively reasonable valuations after their previous stock price adjustments, focusing mainly on outdoor sports, mid-to-high-end niche brands, functional home textiles, popular cost-effective brands, upstream textile manufacturing, and differentiated jewelry brands. Key points from Orient include: - In the field of branded clothing, the K-shaped differentiation continues to evolve, focusing on structural opportunities. - After reaching a low point in April retail sales, with the advance push of the 618 event, the bank expects fashion retail situation in May to be slightly better than April. Currently, the bank believes that the most difficult period for branded clothing retail has passed, and it expects the industry to maintain a weak recovery and a deepening K-shaped differentiation trend throughout 2026. In the short term, the bank is optimistic about sub-fields such as outdoor sports, mid-to-high-end niche brands, functional home textiles, and popular value-for-money brands. In the medium to long term, demand for branded clothing is expected to focus on core elements such as technology empowerment, environmental sustainability, and Chinese aesthetics. - In the short term, the bank recommends focusing on upstream opportunities in textile manufacturing, while also moderately paying attention to midstream manufacturing opportunities. - Benefitting from the inflation in upstream sectors and the business model of early procurement of raw materials, the logic of the improvement in the performance of the upstream textile manufacturing industry that started in the fourth quarter of last year is expected to continue deepening in the second quarter. The bank is optimistic about opportunities in the upstream manufacturing of the woolen and cotton textile sub-industries. Last week, the price of Australian wool hit a new high since the current round of increase, reflecting market expectations of tight supply and demand in the sub-industry. As for midstream manufacturing, the bank expects companies to face greater pressure in the first half of 2026 due to factors such as slowing overseas demand, upstream price increases, and RMB appreciation. However, the bank expects some improvement in the second quarter compared to the first quarter, with the second half of the year expected to be better than the first half. Leading midstream manufacturing companies have seen significant adjustments in their stock prices, such as Zhejiang Weixing Industrial Development, SHENZHOU INTL, and Huali Industrial Group, but their long-term global competitive position remains unchanged, and at their current levels, the bank believes they have gradually entered the position for left-hand side layout. - In the gold and jewelry sector, the bank focuses on companies that have a strong brand differentiation or are actively upgrading their business models. - The significant increase in gold prices and high volatility over the past two years have presented challenges to the gold and jewelry industry, forcing companies to reshape their channels, adjust their product structures, and enhance their self-operated retail capabilities. In the current industry environment, the bank is particularly optimistic about companies with prominent brand differentiation, a focus on youthfulness and Eastern cultural characteristics, or traditional jewelry companies that are actively upgrading their business models and have significant potential for growth in the future. Risk warning - Fluctuations in domestic clothing and jewelry consumption demand recovery, exchange rate fluctuations, prolonged duration of upstream price increases, etc.