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main content
Investment in the textile industry is expected to be more rational, and the trend of domestic production capacity shifting to overseas will continue. Subject to the adjustment of industrial structure, the blind expansion of the industry has been curbed in recent years. It is expected that the overall investment of the industry is expected to be more rational in 2019, and the growth rate of the industry will remain low. In view of the continuous increase in labor costs in China, the manufacturing cost advantage is gradually weakened, and domestic production capacity is gradually weakened. The trend of moving overseas will continue.
Domestic textile and apparel demand growth rebounded weakly, but trade friction has adversely affected textile exports. In 2017, the growth rate of textile and apparel demand has stabilized, and the growth rate in the first half of 2018 was 9.2%, which is higher than the growth rate of total retail sales of consumer goods. However, given the downward pressure on China's economic growth, the trade friction between China and the United States continues to be constant. The export environment is still facing greater uncertainty, and industry demand is expected to maintain a low growth rate in 2019.
The medium and long-term cotton prices have an upward trend, which will bring some pressure on the profitability of cotton spinning enterprises. In recent years, China's cotton production has a weak overall trend. The national reserve cotton release has eased the gap between supply and demand of cotton to a certain extent. However, with the national reserve cotton rotation, the inventory is decreasing year by year. In the future, China's cotton supply and demand gap may continue to expand, and the medium and long-term cotton price has Upward trend.
The profitability of the textile industry has declined, and the slowdown in revenue and profit growth has been the main tone of the industry at this stage. In the first three quarters of 2018, the growth rate of main business income, total profit growth rate and sales profit rate of enterprises above designated size were in a downward trend; the operating income and operating profit of listed companies in the industry maintained growth, which was better than the industry average. However, the overall gross profit margin has declined slightly. In the future, with the acceleration of industrial restructuring of the textile industry and the phasing out of backward enterprises, low-speed growth has become the main tone of the development of the industry at this stage.
The operating level of the listed companies in the industry has increased, and the solvency index has weakened, and the future credit risk may rise. At the end of September 2018, the overall debt scale and asset-liability ratio of listed companies in the industry increased, and the average ratio of current ratio and quick ratio indicators weakened. In the end of 2017, 9 of the 35 sample companies had net cash flow from operating activities that could not cover “distribution of dividends”. , profit or payment of cash paid for interest"; each company's EBITDA interest protection multiples are more serious, and some companies have poor stability of this indicator.
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I. Industry Outlook
The growth rate of the textile industry continued to decline, and the industry investment was more rational. At present, the industry's production capacity is sufficient and the utilization rate continues to rise. In the long run, the domestic production capacity will continue to shift to overseas.
In recent years, the scale of the textile industry has continued to expand, but the growth rate has slowed down markedly, and industry investment has become more rational. In 2017, the fixed assets investment of the textile industry reached 693.614 billion yuan, a year-on-year increase of 5.9%. The growth rate was 4.8 percentage points lower than that of 2016. The completion of fixed assets investment in the first half of 2018 increased by 0.8% year-on-year. The growth rate slowed down compared with the same period of last year. 6.3 percentage points. At present, the textile industry's production organization form, factor comparative advantage, market competition pattern and resource and environmental constraints have seen new phase changes. Due to industrial restructuring, blind expansion has been curbed. It is expected that the overall investment of the industry is expected to be more rational in 2019. The growth rate of the industry has remained at a low level.
In recent years, the growth rate of the value added of the textile industry has accelerated. In 2017, the added value of industrial enterprises above designated size increased by 4% year-on-year, and the growth rate fell by 1.5 percentage points. In the first half of 2018, the added value of industrial enterprises above designated size increased by 1.1% year-on-year, and the growth rate dropped by 3.4 percentage points. From the perspective of the output of cloth and yarn, the output of cloth and yarn in 2017 was 69.56 billion meters and 40.05 million tons respectively, both of which increased; the output of cloth and yarn in the first half of 2018 was 26.720 billion meters and 16.73 million tons, respectively. However, the growth rate has declined compared with the same period in 2017. At the end of June 2018, the end-of-year value of finished goods in the textile industry (above the main business income of more than 20 million) was 138.45 billion yuan, still at a relatively high level. In 2017, the capacity utilization rate of the textile industry was 80.2%, up 4.2 percentage points year-on-year. In the first half of 2018, the industry capacity utilization rate further increased to 81.1%. It is expected that the growth rate of industrial value-added of textile industry will further shrink in 2019, but the production capacity is still sufficient, and with the upgrading of technology and equipment, the capacity utilization rate is expected to further increase.
There is a tendency for domestic production capacity to shift overseas. At present, a number of domestic listed textile companies have begun to expand overseas production capacity, including the industry leading enterprises Lutai A, Blum Oriental (601339, shares) and Tianhong Textile. As early as 2006, Texhong Textile began to deploy overseas production capacity in Vietnam. In 2017, its production capacity has reached 1.25 million spinning. Blum Oriental's textile project in Vietnam was put into production in 2012. At the end of 2017, Blum's OOCL production capacity accounted for approximately 42% of the company's total production capacity. Lutai A has set up production bases in Vietnam, Cambodia and Myanmar, and the 30 million color weaving project in Vietnam in 2017 has been put into production. Considering that China's labor costs continue to rise, the manufacturing cost advantage is gradually weakened, while the labor costs in Southeast Asia, South Asia and other countries are cheaper. In the long run, the trend of domestic production capacity shifting overseas will continue.
Domestic textile and apparel demand growth rebounded weakly, but the adverse impact of the economic growth rate on the textile industry's terminal demand will continue. It is expected that industry demand will maintain a low growth rate in 2019.
In recent years, the growth rate of demand in the domestic textile and apparel industry has rebounded weakly, and the retail situation has been steadily improving. It is expected that industry demand will maintain a low growth rate in 2019. With the development of urbanization and the increase in per capita disposable income, the total retail sales of consumer goods in China has continued to grow. In 2017, the total retail sales of consumer goods reached 36.62 trillion yuan, a cumulative increase of 10.2%. Since 2011, the demand growth rate of textiles and garments (including shoes, hats, needles and textiles) has been declining for six consecutive years, and the growth rate is slowing down. However, the demand growth rate has stabilized in 2017. The retail sales of needles and textiles was 1.46 trillion yuan, a year-on-year increase of 7.8%. The growth rate increased by 0.8 percentage points year-on-year, but it was still lower than the growth rate of total retail sales of social consumer goods by 2.4 percentage points during the same period. From January to June 2018, the retail sales of clothing, shoes, hats, and textiles of enterprises above designated size in China was 665.090 billion yuan, a year-on-year growth rate of 9.2%, a significant increase from the same period in 2017, while the total retail sales of goods above designated size increased by 7.2%. %, compared with other consumer goods, the performance of textile and apparel consumer goods has been rising steadily this year. In view of the current downward pressure on China's economic growth, it is expected that industry demand will maintain a low growth rate in 2019.
Textile exports are picking up, but Sino-US trade friction will have an adverse impact on exports.
China's textile and apparel exports have shown a negative growth since 2015, and this trend has improved in 2017. In 2017, the total export value of textile yarns, fabrics and products denominated in US dollars was US$10,977.1 million, up 4.5% year-on-year; from January to June 2018, the total export of textile yarns, fabrics and products was US$58.33 billion, a cumulative increase of 10.20% year-on-year. Since then, exports have continued to grow in 2017. At present, textile exports as a whole have rebounded, reversing the decline in 2015 and 2016.
However, the recent trade friction between China and the United States will have an adverse impact on the textile industry's exports. In 2018, the Trump administration imposed a “package tariff” on many Chinese products. After China’s counterattack on US tax increases, on July 10, 2018, the Trump administration threatened to impose 10% on China’s $200 billion worth of goods. Tariffs, which cover all kinds of textile yarns, fabrics, industrial finished products, etc., only end products such as clothing and home textiles are not included. Later, the Trump administration announced that it would impose a 10% tariff on September 24, 2018, and impose a 25% tariff on January 1, 2019, which would create certain uncertainty about the trade environment of China's textiles. According to the statistics of the China Chamber of Commerce for Import and Export of Textiles, China exported US$45.64 billion worth of textiles, clothing and raw materials to the United States in 2017, accounting for 16.9% of the total export value of textiles and clothing. This taxation list will affect China’s exports of textiles and apparel to US$10.3 billion. The US dollar accounted for 22.6% of China's exports of textiles, clothing and raw materials to the United States, accounting for 3.81% of China's textile and apparel exports.
According to the People’s Daily on December 2, 2018, State Councilor and Foreign Minister Wang Yi said that China and the United States agreed to stop adding new tariffs to each other. The US government’s 10% tariff on China’s $200 billion product was originally set at It was raised to 25% on January 1, 2019. It has now decided to remain at 10% on January 1, 2019. The two sides decided not to impose new tariffs on new products. Considering that the 10% increase in tariffs is still maintained in 2019, it is still not conducive to the export of the textile industry.
Since the end of April 2018, the central parity of the US dollar against the RMB has started to rise. The depreciation of the RMB has, to a certain extent, buffered the impact of trade wars on textile exporting enterprises, and has contributed to the textile and garment industry that relies on exports. If the trend of RMB exchange rate depreciation continues, textile and garment enterprises will obtain more export orders, increase corporate income, and increase the gross profit margin of export enterprises.
The upward pressure on domestic cotton production is relatively high, and with the digestion of the national reserve cotton stocks, the gap between China's cotton supply and demand may continue to expand in the future, and the medium and long-term cotton prices have an upward trend, which will bring some pressure on the profitability of cotton spinning enterprises.
China's cotton planting area continues to decline, and domestic cotton production is under increasing pressure. In the future, China's cotton supply and demand gap may continue to expand. In 2017, the domestic cotton planting area was 3.23 million hectares, a decrease of 120,000 hectares from the previous year. The annual cotton output was 4.199 million tons, a slight increase from the previous year, and the overall output trend was weak. The discharge of cotton in the country has alleviated the gap between supply and demand of cotton to a certain extent. As of September 30, 2018, the reserve cotton rotation ended this year, with a total planned output of 4.312 million tons and an actual turnover of 2.506 million tons. With the national reserve cotton rotation, the inventory is decreasing year by year, and the gap between China's cotton supply and demand may continue to expand in the future.
China's cotton prices have started to rise since 2016, and the overall price remained stable in 2017. From mid-May 2018, the spot price of 328 cotton went up all the way, including June 19, 2018, reaching a high of 16,402.00 yuan per ton, May-June. The increase was once 9%. However, in the short-term, due to the comprehensive factors such as the listing of new cotton, higher yields and lower-than-expected transactions, the spot cotton market is in a downturn, and the upward pressure is high in the short term. Considering that the gap between cotton supply and demand may continue to expand, in the medium and long term, China's cotton prices have an upward trend. For textile enterprises with cotton as the main raw material, the procurement cost of raw materials accounts for a higher proportion of total cost of enterprises, and the price of raw materials rises. The cost of cotton spinning enterprises has formed certain pressure.
Second, the industry financial risk outlook
This report selects 35 textile manufacturing listed companies (hereinafter referred to as “sample enterprises”) under the SW industry classification as sample enterprises, as detailed in the appendix.
The profitability of the industry has a downward trend. The performance of listed companies is better than the industry average. The scale effect is obvious. The slowdown in revenue and profit growth under structural adjustment is the main tone of the industry development at this stage.
In 2017, the main business income of the textile industry (main business income of over 20 million yuan) increased by 3.7% year-on-year, and the growth rate dropped by 0.2 percentage points from the previous year; the total profit increased by 3.6% year-on-year, and the growth rate dropped by 0.1 percentage point from the previous year; The rate was 5.2%, a slight decrease from the previous year. In the first three quarters of 2018, the growth rate of main business income, total profit growth rate and sales profit rate of enterprises above designated size were in a downward trend. In the future, with the acceleration of industrial restructuring of the textile industry and the phasing out of backward enterprises, the growth pressure of China's textile industry is still relatively large. The slowdown in income and profit growth under structural adjustment has become the main tone of the industry development at this stage.
In recent years, the overall operating income of sample companies has maintained growth, and the scale of net profit has continued to increase, but the growth rate has declined. The performance is better than the industry average, and the scale effect is obvious. In 2017, with the weak rebound of clothing terminal demand, the sample enterprises realized a total operating income of 83.074 billion yuan, a year-on-year increase of 16.25%; realized operating profit totaled 7.38 billion yuan, an increase of 65.81%; net profit totaled 6.186 billion yuan, an increase of 41.36. %. In the first three quarters of 2018, the sample enterprises realized operating income of 71.661 billion yuan, a year-on-year increase of 9.60%; realized operating profit of 6.215 billion yuan, an increase of 13.37%; net profit of 5.056 billion yuan, an increase of 9.50%.
In terms of profitability indicators, the comprehensive gross profit margin of the sample companies was relatively stable, maintaining a fluctuation of 19%, but the overall gross profit declined slightly. During the period of textile manufacturing listed companies, the expense ratio remained at around 9%-10%, of which 9.70% in 2017. The overall period expense rate was not high, and the management expenses accounted for the largest proportion during the period. In terms of operating profit margin, since 2016, the overall operating profit margin of sample companies has stabilized and stabilized, reaching 9.69% in 2017.
According to the performance data of listed companies in the SW textile manufacturing sub-sector, there are a large number of listed companies in the cotton spinning industry, but the cotton textile industry's revenue growth in the first three quarters of 2018 is relatively weak, only higher than other textile industries, and weaker than the growth rate in the same period of 2017. . In 2017, silk and printing and dyeing revenues increased significantly, with growth rates of 22.00% and 20.00%, respectively. In terms of profitability, the overall gross profit margin of wool, cotton and silk in the sub-sectors in 2017 decreased slightly year-on-year, and profitability declined. From January to September 2018, gross profit margin continued to decline. Because the textile industry is a typical labor-intensive industry, labor costs account for a relatively high proportion, and the industry competition is fierce. The overall gross profit margin of each sub-sector is relatively low. The comprehensive gross profit margin of the auxiliary materials industry is the highest in the past three years. 28.41%, the gross profit margin for January-September 2018 reached 30.24%. In addition, the gross profit margin of the printing and dyeing industry remained at around 20%.
The overall turnover rate of accounts receivable of listed companies in the industry has a downward trend. The turnover rate of inventories and accounts receivable of printing and dyeing industry is better than that of other sub-sectors. The future turnover rate of accounts receivable in the industry will continue to decline.
In recent years, the inventory turnover rate of the textile industry has improved year by year. In 2017, the overall inventory turnover rate of the industry was 2.48, an increase of 0.54 over 2015. The capital occupation level of the industry inventory decreased year by year. Although the overall scale of operating income of sample enterprises is on the rise, the growth rate is weaker than the growth rate of accounts receivable, which makes the turnover rate of accounts receivable decrease year by year. The overall receivables ratio of the industry in 2017 is 5.91, compared with 2015. The year dropped by 0.25. In view of the current downward pressure on economic growth, and the downstream industry's economic downturn is relatively low, the overall industry receivables turnover rate may continue to decline in the future.
From the perspective of SW textile manufacturing sub-industry, cotton wool industry stocks are mainly raw material cotton, and auxiliary materials industry stocks are mainly self-made semi-finished products. The inventory turnover rate of both is weaker than that of other sub-sectors, auxiliary materials industry and other textile industry accounts receivable. The turnover rate is relatively low. In the printing and dyeing industry, the accounts receivable turnover rate and inventory turnover rate are both higher, and the inventory and accounts receivable are realized faster than other sub-sectors.
The asset-liability ratio of listed companies in the industry has risen, and some of the solvency indicators have been slightly weakened. It is expected that the operating level of liabilities will continue to increase in 2019, and credit risk may rise.
From the financial data of sample companies, as of the end of 2017, the average asset-liability ratio was 46.53%, a slight decrease year-on-year, and rose to 48.54% at the end of the third quarter of 2018. As of the end of the third quarter of 2018, the total debt of the sample enterprises rose to 86.106 billion yuan, the asset-liability ratio was further improved, and the overall debt operation level was improved.
From the sample company's current ratio and quick ratio index, the average value of the two companies at the end of 2017 is 1.50 and 0.96, respectively, and the performance is acceptable. Among them, 15 of the 35 listed companies have a flow ratio of 2 or more, and the quick ratio is above 1. There are 14 homes. Since 2018, the average value of the sample enterprise's current ratio and quick ratio index has been weakened. The average value at the end of September 2018 is 1.40 and 0.87 respectively. The overall short-term debt pressure is controllable, but some enterprises' liquidity ratio and quick ratio are poor. Large short-term debt repayment pressure. In terms of cash ratio, the sample company's cash ratio has continued to increase since 2014. The average cash ratio in 2017 is 1.03. Cash and trading financial assets can still cover current liabilities. However, from the net cash flow/current liabilities index generated by operating activities, the average value for 2017 is 0.11, of which 5 are negative and 10 are below 0.1. In addition, the net cash flow from nine of the 35 sample companies at the end of 2017 cannot cover “distribution of dividends, profits or cash paid for interest payments”. Such companies can only repay interest through refinancing, once refinancing is blocked or not In time, you may face debt overdue or default. Affected by the increase in profitability, the median EBITDA interest coverage ratio of sample companies increased in 2014-2017, but the EBITDA interest coverage ratio of each company is more serious, and the stability of this indicator is poor.
Disclaimer: The data used in this report are all from the compliance channel. The conclusion is drawn through reasonable analysis. The conclusion is not instructed or influenced by any other third party.
The opinions expressed in the report are only the analysis and judgment made by the relevant researchers based on the relevant public information, and do not represent the company's views.
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