Core Insights - The report emphasizes the importance of value as an anchor in the textile and apparel industry, suggesting a shift towards innovative strategies to break through competitive pressures [1][3]. Group 1: 2025 Review - The textile and apparel index underperformed the broader market, with brand performance under pressure and manufacturing showing a high-to-low trend [4][9]. - Retail sales growth for apparel remained stable, with online channels outperforming offline, particularly in the second and third quarters [18][19]. - The overall performance of the textile manufacturing sector showed a decline in exports due to tariff impacts, with a notable slowdown in growth rates [28][30]. Group 2: 2026 Main Lines - The report identifies three main investment themes for 2026: 1. The outdoor sports segment is expected to thrive, focusing on niche positioning and technological innovation [3][5]. 2. High-quality products are anticipated to drive new demand, with opportunities in the trillion-yuan market for breakthrough players [3][5]. 3. Trade stability is expected, favoring leading manufacturers with improving market share and efficiency [3][5]. Group 3: Investment Recommendations - Investors are advised to focus on three key areas: outdoor sports, quality manufacturing, and brand innovation, with specific companies highlighted for their growth potential [5][6]. - Notable companies include Anta Sports, Li Ning, and Shenzhou International, which are positioned well for future growth [5][6]. Group 4: Company Performance - The report provides detailed earnings forecasts and investment ratings for key companies, indicating a generally positive outlook for the sector despite recent challenges [6][7]. - Companies like Anta Sports and Li Ning are projected to maintain strong earnings per share (EPS) growth, with respective forecasts of 5.42 and 1.09 for 2026 [6].

Investment Rating - The report maintains a "Positive" investment rating for the textile, apparel, and luxury goods industry [7] Core Insights - The report highlights that if Nike's sales and inventory situation reaches a turning point by the end of this year, upstream manufacturing companies are expected to see a rebound in orders due to new product development and replenishment of old products. This is anticipated to lead to a recovery in net profit margins for many companies next year [2][5] - The report recommends several textile manufacturing companies related to the Nike supply chain, including Huayi Group, Shenzhou International, Crystal International, Yue Yuen Industrial, and Weixing Co., as well as retail company Tmall [2][5] Summary by Sections Inventory Cycle and Manufacturing - The U.S. apparel inventory cycle serves as a good indicator of the upstream textile manufacturing sector's health. The report reviews the performance of Chinese apparel manufacturing companies during historical inventory phases, indicating that stock prices and valuations are likely to recover as the industry transitions from active destocking to active restocking [4][24] - In the short term, the report notes that the impact of tariffs is diminishing, allowing the manufacturing sector to return to fundamental logic, emphasizing the importance of the inventory cycle switch and Nike's recovery [4][32] - Long-term trends indicate a shift towards globalization and core supplier systems in the apparel industry, with brand companies increasingly relying on core suppliers, which enhances the competitive landscape for leading manufacturers [4][32] Individual Companies - The report emphasizes the potential recovery opportunities for leading manufacturers in the Nike supply chain. If Nike's sales and inventory situation improves as expected, upstream manufacturing companies will likely see a rebound in orders, leading to a recovery in net profit margins for many companies next year [2][5] - The report specifically recommends textile manufacturing companies such as Huayi Group, Shenzhou International, Crystal International, Yue Yuen Industrial, and Weixing Co., along with retail company Tmall, as key investment opportunities [2][5]

Investment Rating - The report assigns a "Buy" rating for the company, marking its first coverage [12]. Core Insights - The company has established a strong vertical integration model, enhancing production efficiency through overseas capacity, specialized factories, and rapid response to large orders. This has resulted in a solid binding with top clients and a leading fabric R&D capability, indicating that the current valuation is low and expected to gradually recover [4][10]. - Revenue is anticipated to grow by double digits this year, driven by increased market share from existing clients like Adidas and Uniqlo, alongside a recovery in Nike's performance and an overall improvement in industry conditions [4][10]. - Profitability is expected to accelerate in the second half of the year, with stable labor costs and tax rates, and a better profit elasticity anticipated next year as Nike recovers [4][10]. Company Overview - The company is recognized as the largest vertically integrated knitwear manufacturer in China, with long-term partnerships with premium brands such as Nike, Adidas, PUMA, and Uniqlo. Its strategic foresight and close collaboration with upstream enterprises have facilitated a comprehensive vertical integration of its business [7][19]. - The company has maintained steady revenue growth over the years, achieving a gross margin of 25-30% due to its product selection and vertical integration, although profit margins have fluctuated recently due to factory shutdowns and rising labor costs [7][33]. Industry Dynamics - In the short term, the apparel industry is transitioning from a destocking phase to a potential recovery, with expectations of improved order volumes as major brands like Nike reach operational turning points [8][40]. - Long-term trends indicate steady growth in downstream apparel consumption, diversification of brands, and an increase in outsourcing by brand owners, which will drive expansion for upstream suppliers [8][40]. - The company has shifted its focus towards the higher-growth and more certain sportswear segment, benefiting from a higher proportion of sports apparel and greater client concentration, which helps mitigate revenue volatility [9][30]. Financial Projections - The company's projected net profits for 2025, 2026, and 2027 are estimated at 6.78 billion, 7.72 billion, and 8.76 billion respectively, reflecting year-on-year growth rates of 9%, 14%, and 13% [10]. - The price-to-earnings ratio (PE) is expected to decrease to 13x by September 2025, indicating a low valuation compared to historical levels [10].

Core Viewpoint - The report from Daiwa indicates increased confidence in the order status for Shenzhou International's sports apparel for next year, expecting changes in the product mix to drive average selling prices and gross margin expansion [1] Group 1: Order Performance - Following the implementation of equal tariffs in ASEAN in August, many OEM factories experienced weak order performance in the third quarter due to cautious ordering attitudes from downstream customers [1] - However, a noticeable recovery in orders was observed in November, suggesting a positive trend [1] Group 2: Future Outlook - The expectation of multiple sports events taking place next year is likely to sustain the recovery trend in orders [1] - Daiwa has reiterated a "Buy" rating for Shenzhou International, raising the target price from HKD 80 to HKD 84 [1] Group 3: Earnings Forecast - The earnings per share forecast for 2025 to 2027 has been adjusted downwards by 1% to 2% [1]

Core Viewpoint - Daiwa has increased confidence in the order status for Shenzhou International (02313) sportswear for next year, expecting changes in the product mix to drive average selling price and gross margin expansion [1] Group 1: Order Performance - After the ASEAN equal tariff came into effect in August, many OEM factories experienced weak order performance in the third quarter due to cautious ordering attitudes from downstream customers [1] - However, a noticeable recovery in orders was observed in November, indicating a potential turnaround [1] Group 2: Future Outlook - The firm anticipates that the recovery trend will likely continue, supported by multiple sports events scheduled for next year [1] - Daiwa has reiterated a "Buy" rating and raised the target price from HKD 80 to HKD 84, while slightly adjusting the earnings per share forecast for 2025 to 2027 down by 1% to 2% [1]

Core Viewpoint - Daiwa has increased confidence in the order status of Shenzhou International (02313) for sports apparel in the coming year, anticipating that changes in the product mix will drive average selling prices and gross margin expansion [1] Group 1: Order Performance - Following the implementation of equal tariffs by ASEAN in August, many OEM factories experienced weak order performance in the third quarter due to cautious ordering attitudes from downstream customers [1] - However, a noticeable recovery in orders was observed in November, indicating a potential turnaround in demand [1] Group 2: Future Outlook - The firm expects the recovery trend to continue, supported by multiple sports events scheduled for next year [1] - Daiwa has reiterated a "Buy" rating for Shenzhou International, raising the target price from HKD 80 to HKD 84 [1] Group 3: Earnings Forecast - Earnings per share forecasts for 2025 to 2027 have been adjusted downwards by 1% to 2% [1]

Core Viewpoint - Guoyuan International maintains a "Buy" rating for Shenzhou International (02313) and raises the target price to HKD 91.9, citing a reduction in valuation suppression factors such as tariff uncertainties and weak major clients, with the company's "dual circulation" strategy proving successful [1] Group 1: Financial Performance - In H1 2025, the company's revenue reached CNY 14.97 billion, representing a growth of 15.3%, with a gross margin of 27.1%, down by 1.9 percentage points [2] - The net profit attributable to the parent company was CNY 3.18 billion, an increase of 8.4%, with a net profit margin of 21.2%, down by 1.4 percentage points [2] - The first major client (leisure) contributed a revenue increase of 27%, while the third major client (sports) saw a revenue increase of 28% [2] Group 2: Market Dynamics - Following the implementation of tariffs, the company's Southeast Asia capacity layout benefits from the accelerated transfer of the textile industry chain, with tariff levels in Vietnam and Cambodia set at 20% and 19%, respectively [3] - The company experienced faster revenue growth from its four major clients compared to its overall growth, indicating an increase in penetration rates [3] Group 3: Competitive Positioning - The increase in customer penetration rates reflects the company's alignment with brand clients' current supply chain risk preferences, showcasing its strong manufacturing and responsiveness as a leading producer [4] - The company expanded its product offerings, including new items like football jerseys for its second-largest sports client, which is expected to enhance future revenue and maintain gross margin advantages [4]

Group 1 - The core viewpoint of the report indicates a moderate recovery in the domestic apparel industry in 2025, with retail sales of clothing, shoes, and knitted products increasing by 3.1% year-on-year to 1.1 trillion yuan, although still lagging behind the overall retail performance of consumer goods, which grew by 4.5% [1][12] - The report highlights that the gap in retail sales growth between clothing and overall consumer goods has narrowed significantly compared to 2024, where clothing sales only grew by 0.3% [1][12] - The report notes that the textile and apparel index has shown a fluctuating upward trend, with the A-share textile and apparel sector rising by 11.3% in 2025, underperforming the CSI 300 index, which increased by 20.6% [2][28] Group 2 - The textile manufacturing sector is expected to see performance and valuation recovery in 2026, driven by the diminishing impact of reciprocal tariffs and improvements in Nike's operational status [3][28] - The report anticipates that clothing consumption will continue to experience a volatile recovery in 2026, with functional and mass-market clothing expected to outperform the broader market [3][28] - The home textile sector is entering a new replacement cycle, supported by subsidy policies, with recommendations to focus on companies like Luolai Life and Mercury Home Textile [3][28] Group 3 - The report provides investment recommendations, suggesting a focus on companies such as Huayi Group, Shenzhou International, and Crystal International in the textile manufacturing sector, and Anta Sports and 361 Degrees in the apparel sector [3][28] - The report emphasizes that the performance of the brand apparel sector has shown gradual improvement, with key companies maintaining healthy inventory levels and experiencing a slight increase in gross margins [46][50] - The textile manufacturing sector has faced revenue pressure due to reciprocal tariffs, with a noted decline in net profit for key companies in the first three quarters of 2025 [61][62]

Core Viewpoint - Southbound funds have increased their holdings in Shenzhou International (02313.HK) significantly, indicating positive investor sentiment towards the company [1] Group 1: Southbound Fund Activity - On November 12, southbound funds increased their holdings by 1.40%, adding 135.95 million shares of Shenzhou International [2] - Over the past five trading days, there have been four days of net increases, totaling 257.43 million shares [1] - In the last twenty trading days, there were eleven days of net increases, amounting to 285.59 million shares [1] - As of now, southbound funds hold 98.53 million shares of Shenzhou International, representing 6.54% of the company's total issued ordinary shares [1] Group 2: Company Overview - Shenzhou International Group Holdings Limited primarily engages in the production and sale of knitted apparel products [2] - The company's main business involves manufacturing knitted products through a combination of OEM (Original Equipment Manufacturer) and ODM (Original Design Manufacturer) services for clients [2] - Product categories include sportswear, casual wear, underwear, and other knitted products [2] - The company also engages in trading and property management through its subsidiaries, operating in both domestic and international markets [2]

Market Overview - Hong Kong stocks showed a positive trend, closing up 0.85% as bulls took control, indicating a lack of negative news is perceived as positive [1] - The U.S. House of Representatives is expected to vote on a compromise plan to end the longest government shutdown in U.S. history, which could restore funding to government agencies [1] - The ADP private sector employment report for October showed a decrease of 45,000 jobs, the largest drop in two and a half years, suggesting a cooling labor market and increasing expectations for a Fed rate cut in December [1] Sector Performance - The banking sector saw a rebound with major banks like Agricultural Bank of China reaching new highs, driven by long-term investments from insurance funds and public funds [1] - Consumer sectors are gaining traction, with companies like "Hushang Auntie" seeing a significant increase of nearly 29%, indicating a recovery in consumer sentiment [2] - Retail sales in Hong Kong are projected to rise by 4% year-on-year in October, benefiting retail rental stocks [3] Company Highlights - Baijie Shenzhou reported a 44.2% increase in total revenue for the first three quarters, driven by sales growth of its self-developed products [3] - Xiaomi announced a significant sales figure of over 29 billion yuan during the Double 11 shopping festival, indicating strong consumer demand [4] - The Ximangdu iron ore project, with reserves exceeding 4.4 billion tons, has commenced production, potentially altering the global iron ore supply landscape and benefiting companies like Maanshan Iron & Steel [5] Industry Developments - The Chinese commercial aerospace sector is set to advance with the upcoming maiden flight of the reusable rocket "Zhuque-3," which aims to reduce launch costs significantly [6] - The sportswear manufacturing sector is expected to see a recovery in demand, with Shenzhou International projecting a 15.3% increase in revenue for the first half of 2025 [7] - The company has expanded its overseas production capacity, with 53% of its garment output coming from international facilities, indicating a strategic shift towards globalization [8]