Guosen: Branded apparel: capture resilience in high-end consumption and high dividends; manufacturing sector: focus on leaders in growth and targets with fundamental recovery.

Guosen released a research report stating that on the brand side, premium sports/outdoor and differentiated casual leaders are preferred for excess growth and strong earnings certainty; on the manufacturing side, leaders with high order visibility and large profit-recovery elasticity are preferred, while also considering valuation safety margin; key subsequent milestones to track are Double 11 GMV and rankings, October retail sales, GMV and export data. 1) Branded apparel: terminal marginal improvement, with premium sports/outdoor, differentiated casual and mid-to-high-end home textiles continuing relative prosperity. September apparel retail sales rose 1.2% YoY, turning positive, with January-September cumulative +4.6%; September growth recovered markedly from -1.0%/-0.5% in July-August. 2) Textile manufacturing: export acceleration validates external demand recovery, with order inflection and profit improvement resonating. September apparel exports +17.8%, textile yarn exports +25.2%, with growth significantly higher than July-August; the Q3 OEM profit inflection is initially confirmed, upstream manufacturing price increases proceeded smoothly, and Q4 is expected to continue the sequential improvement trend. Guosen's main views are as follows: 2026 Q3 Review Brand retail turned positive in September, manufacturing exports improved quarter by quarter. 1) Brand retail: January-September cumulative apparel retail sales +4.6% YoY, with consecutive negative growth in July and August (-1.0%/-0.5%) and a return to positive at +1.2% in September; apparel online cumulative +3.8%, basically in line with all channels. On the e-commerce side, sports/outdoor fell deeply in July-August and turned positive in September (sports +4%, outdoor +5%), with ASICS, Adidas, KAILAS, PELLIOT and Decathlon leading, while casual apparel and home textiles remained under pressure (-8% and -18% respectively in September); on social media, Adidas ranked first in all four metrics, while LI NING, Uniqlo and MIUMIU led in follower growth and engagement. 2) Manufacturing exports: US apparel terminal demand remains resilient, with August retail sales +4.5% YoY, channel inventory continuing to destock and nearing the end; China's textile and apparel exports have trended favorably since July, with September apparel/footwear +23.8%/+20.2% YoY, January-September textiles/apparel/footwear cumulative +5.4%/+4.8%/-2.5%, and Vietnam September textiles/footwear +4.4%/+7.7%, with growth accelerating; Taiwanese OEMs' Q3 revenue declines narrowed quarter by quarter, with September Yue Yuen/Ru Hung/Makalot/Eclat +5.6%/+8.3%/+24.1%/+14.0% YoY, Ru Hung orders already visible into early Q2 2027, with Q4 better than Q3. 3) Raw materials and inventory: year-to-date domestic cotton/international cotton +7.8%/+15.2%, nylon filament and polyester filament up 30%-45%, fluctuating upward since July after a May pullback, with domestic and international cotton diverging in October and the price spread narrowing; inventory-to-sales ratios of key overseas brands are generally healthy, with Nike and Fast Retailing rising YoY in Q3 but still controllable, while Adidas, Puma, Deckers and VF saw inventory-to-sales ratios decline QoQ and remain basically stable YoY. Q3 Report Summary Premium brands lead, OEM manufacturing profits improve, upstream manufacturing price increases materialized. In 2026Q3 the industry continued the pattern of "domestic demand weakly stabilizing, external demand somewhat recovering, and strong sector divergence." Brand-side divergence widened further: premium and differentiated brands continued rapid growth on pricing power and channel quality, with Biem.L.Fdlkk Garment and Dazzle Fashion maintaining double-digit or higher growth, Beijing Sanfo Outdoor Products achieving double-digit growth in both revenue and profit driven by professional outdoor, and home textile leader Luolai Lifestyle Technology maintaining relatively fast profit growth; mass brands were generally under pressure, with Zhejiang Semir Garment growth slowing to flat, BXN Holding Co.,Ltd., Shanghai Shuixing Home Textile and Shenzhen Fuanna Bedding and Furnishing seeing both revenue and profit weaken, and Hla Group Corp. maintaining relatively fast growth in its main brand and online channels, while group-buy decline and investment income volatility dragged on reported results. The manufacturing side showed two main threads of "midstream recovery, upstream price increases": OEM revenue still declining but with narrowing declines for consecutive periods, the profit inflection initially established, with Huali Industrial Group gross margin up YoY and QoQ and Anhui Korrun single-quarter profit returning to positive growth; upstream materials benefited from rising prices of cotton, wool, nylon and other raw materials and the realization of price pass-through, with Zhejiang Weixing Industrial Development and Zhejiang Xinao Textiles Inc. seeing both volume and price rise and profits accelerating, Bros Eastern Co.,Ltd volume down but price up with cost dividends released, and Zhejiang Taihua New Material Group revenue growth combined with gross margin recovery, with non-recurring profit elasticity significantly amplified. Q4 Outlook Brand-side structural divergence continues, manufacturing orders and profit recovery imminent. Brand-side terminals improved sequentially from September, with the National Day Golden Week continuing the recovery trend; Q4 brands are expected to maintain weak recovery and strong divergence, with premium outdoor, differentiated casual and home textile leaders having stronger certainty. Manufacturing-side export acceleration, tariff implementation and customer restocking jointly drive improved order visibility, with both revenue and profit recovery imminent; leader valuations are at historical lows, providing a basis for both fundamental and valuation upside. Risk warnings: weak macroeconomic and consumer demand; international political and economic risks; significant fluctuations in exchange rates and raw material prices; deterioration of brand competition landscape.