Report Industry Investment Rating - Not provided in the given content Core View of the Report - The global cotton supply side is experiencing a "double reduction" in exports from Brazil and the United States. The bottom characteristics of US cotton prices are clear under the dual signals of cost inversion and basis repair, and an upward channel for cotton prices is expected to open [2]. Summary by Relevant Catalogs 1. Supply - side Contraction Expectation Continues to Strengthen - **Brazil**: As the world's largest cotton exporter, it ends a 5 - year capacity expansion. The CONAB report on January 15 predicts a 6.3% year - on - year decrease in cotton production in 25/26, with continuous downward revisions since October 2025. The core producing state of Mato Grosso is expected to have a more radical production cut of 14.5% [3]. - **United States**: The latest WASDE report on January 12 significantly revises down the 25/26 cotton yield per unit by 7.8%, reduces production by 2.5%, and the inventory - to - consumption ratio drops, significantly alleviating inventory pressure [3]. 2. Hard Logic Behind the Production Cut - **Brazilian farmers' profit situation**: Brazilian cotton farmers face a loss with a cost - return rate of - 15.5%, while the competing second - season corn still has an 8.4% return, and the operating cost of corn is only one - third of that of cotton [4]. - **Sowing progress**: Brazil's current sowing rate is only 8.1% (compared to 14.2% in the same period last year). Missing the best growth period for cotton will further strengthen the production cut expectation [4]. 3. Clear Bottoming of US Cotton Prices - **Cost inversion**: The current price (~65 cents/pound) is significantly lower than the average US planting cost (~80 cents/pound) and approaches the policy mortgage interest rate (54.4 cents/pound), with very limited downward space [5]. - **Basis signal**: The basis of basic - grade cotton is at a historical low. High - quality cotton in January has shown a positive basis, which is judged as a leading signal for a medium - term upward price movement [5]. - **Investment advice**: With the implementation of the production cut expectation and the stricter traceability of clothing exports to the United States, the procurement concentration of US cotton is expected to increase. It is recommended to focus on [Bailong Eastern Co., Ltd.], and related target [Texhong International Group]. The low - cost cotton inventory held by these companies will release significant profit elasticity during the upward cycle of cotton prices, and the gross profit margin is expected to be repaired in a positive basis environment [5]. Historical US Cotton Price Analysis - The historical US cotton price has fluctuated greatly due to various factors such as events, policies, and climate. For example, in 2011, the cotton price reached a new high due to factors such as China's cotton purchase and storage policy, India's export ban, and Pakistan's floods [8]. Global Cotton Production and Export Situation - **24/25 Global Top Ten Cotton - Producing Countries**: The top four cotton - producing countries (China, India, Brazil, and the United States) account for about 73% of the total global output. China and India mainly consume their output domestically, while Brazil and the United States export their output [19]. - **24/25 Global Top Ten Cotton - Exporting Countries**: Brazil and the United States together account for nearly 60% of the global cotton export volume. The change in Brazil's supply - demand structure will have a significant impact on the trend of US cotton prices [22]. - **Production Growth of Top Ten Cotton - Exporting Countries**: From 20/21 - 24/25, the production growth rates of different countries vary. For example, Mali has a 257% growth rate, while India has a - 16% growth rate [24]. US Cotton Situation - **25/26 Production Forecast**: Despite the expected increase in the harvested area of US 25/26 cotton, the yield per unit is significantly reduced by 7.8%, resulting in a 2.5% decrease in production compared to the December forecast and a 3.4% decrease compared to 2024/25. The inventory - to - consumption ratio decreases [27]. - **Export Market Change**: In 2018, affected by the Sino - US trade friction, Vietnam became the largest importer of US cotton. In 2024, China regained the top position. It is expected that Southeast Asian countries may increase their procurement of US cotton [29]. Brazilian Cotton Situation - **25/26 Supply and Demand Forecast**: The CONAB report on January 15, 2026, predicts that Brazil's 25/26 cotton planting area will decrease by 2.8% compared to 2024/25, and the output is expected to be 3.82 million tons, a 6.3% decrease from the October 2025 forecast [31]. - **Sowing and Yield**: The sowing rate and yield of Brazilian cottonseeds in 25/26 are lower than last year. The sowing rate is 31.9%, 1.6 percentage points lower than 24/25, and the expected output of cottonseeds in 25/26 is down 6.3% year - on - year and 3.6% month - on - month [34]. - **Mato Grosso State**: The IMEA has significantly reduced the 25/26 planting area in Mato Grosso State by 7.3%, and the total lint output is expected to decrease by 14.5% due to area reduction and yield per unit returning to the average [38]. - **Profit Analysis**: Brazilian cotton planting in the 25/26 season has a cost - return rate of - 15.5%. Competing second - season corn has a better profit situation, and there is a possibility of farmers switching to corn planting. In addition, the current price of Brazilian lint is lower than the US cotton futures price, and the basis decline is widening [40].

Investment Rating - The investment rating for Bros Eastern is "Outperform" with an expected relative return exceeding the benchmark index by more than 10% over the next 12-18 months [4]. Core Insights - The report highlights a significant supply contraction in two major cotton exporting countries: the USA and Brazil, marking a turning point in global cotton supply with a "double reduction" pattern [5][6]. - The USA's cotton yield forecast has been cut by 8% to 856 pounds per acre, leading to a 2% reduction in final output, while Brazil's planting area is expected to decrease by 2.8% and production by 6.3% to 3.82 million tons, the first decline in five years [5][6]. - The report indicates that the US cotton price is showing bottoming characteristics, with current prices around 65 cents per pound, significantly below the average planting cost of 80 cents per pound, suggesting limited downside potential [6][8]. - Brazil's supply-demand changes are identified as a key variable affecting US cotton prices, with estimates indicating a 15.6% cost return rate loss for Brazilian cotton farmers, further supporting the supply contraction narrative [7][8]. Summary by Sections Supply Contraction - The USA's WASDE report indicates an increase in harvested area but a significant yield reduction, easing inventory pressure [5]. - Brazil's CONAB report predicts a decrease in both planting area and production, particularly in Mato Grosso, which accounts for 70% of Brazil's cotton output [5][6]. Price Dynamics - The ICE No. 2 cotton futures price is at a historical low, indicating a clear bottoming trend, with a significant cost inversion against planting costs [6][8]. - The basis analysis shows that the cotton basis is at historical lows, with signs of structural recovery, suggesting potential price increases in the medium term [6][8]. Investment Recommendations - The report recommends Bros Eastern due to its low-cost cotton inventory, which is expected to provide significant profit elasticity as cotton prices rise [8]. - The anticipated increase in raw material prices is expected to boost yarn sales prices and restore gross profit margins through inventory appreciation [8].

Investment Rating - The report assigns an "Accumulate" rating for the industry [2] Core Insights - The supply contraction from two major cotton-exporting countries has been established, with a downward revision in U.S. cotton yield and the first decline in Brazilian cotton production and area in five years [3] - U.S. cotton prices are showing significant bottoming characteristics, with ICE 2 cotton futures significantly below planting costs and basis signals confirming this trend [3] - The core variable is anchored in Brazil, with multi-dimensional data confirming the inevitability of production cuts [3] Summary by Sections Supply Dynamics - The global cotton supply is reaching a critical turning point characterized by a "double reduction" pattern. The USDA's January 2026 report indicates an 8% downward revision in U.S. cotton yield to 856 pounds per acre, leading to a 2% decrease in total production compared to December forecasts. This has alleviated inventory pressure [5] - Brazil, as the world's largest cotton exporter, is experiencing a termination of its supply expansion cycle. The CONAB report predicts a 2.8% reduction in planting area and a 6.3% decrease in production to 3.82 million tons for the 25/26 season, marking the first reduction in both area and production in five years [5] Price Dynamics - U.S. cotton prices have been in a prolonged downturn for nearly three years, with current ICE 2 cotton futures around 65 cents per pound, placing it in the 20% historical low range since 2015. The current price is significantly below the average planting cost of approximately 80 cents per pound, indicating limited downward price potential [5] - Historical data shows that the basis for U.S. cotton has reached a low point, with high-quality cotton exhibiting a positive basis in January, suggesting a structural basis recovery as a leading indicator for mid-term price increases [5] Investment Recommendations - The report is optimistic about the performance elasticity of Bailong Oriental under the upward driving force of U.S. cotton prices. The expected downward revision in U.S. cotton production and the end of Brazil's capacity expansion provide a solid foundation for U.S. cotton price support [5] - The report recommends Bailong Oriental, which holds low-cost cotton inventory that will release significant profit elasticity as cotton prices rise. The increase in raw material prices is expected to boost yarn sales prices and significantly restore gross margins through inventory appreciation in a positive basis environment [5][6]

Core Viewpoint - The 2025 China Enterprise ESG "Golden Responsibility Award" aims to recognize companies that excel in environmental, social, and governance (ESG) practices, promoting sustainable development in China [1][4]. Group 1: ESG Award Overview - The award selection process began in November 2025, attracting over 5,000 companies to participate [5]. - The evaluation criteria included comprehensive ESG performance, professional scoring, and online voting results [5]. - The award is intended to encourage more companies to enhance their ESG capabilities and contribute to high-quality development in China [2][5]. Group 2: Award Recipients - The "Best Responsible Investment Insurance Company" award was given to China Life Insurance, China Pacific Insurance, China Reinsurance, Sunshine Insurance, China People's Insurance, and China Ping An [2][5]. - The award committee congratulated the winning companies and expressed hope for them to lead by example in improving ESG performance [2][5]. Group 3: ESG Rating Center Introduction - The Sina Finance ESG Rating Center is the first Chinese platform dedicated to ESG information and ratings, promoting sustainable development and responsible investment [3][6]. - The center aims to establish ESG evaluation standards suitable for China's characteristics and enhance corporate ratings [3][6]. - It also publishes multiple ESG innovation indices to provide investors with more options regarding corporate ESG performance [3][6].

Core Viewpoint - Bailong Oriental's stock price has shown a positive trend with a year-to-date increase of 4.49%, reflecting investor interest and market confidence in the company's performance [1]. Financial Performance - For the period from January to September 2025, Bailong Oriental reported a revenue of 5.724 billion yuan, representing a year-on-year decrease of 5.76%. However, the net profit attributable to shareholders increased by 33.23% to 550 million yuan [1]. - The company has distributed a total of 4.187 billion yuan in dividends since its A-share listing, with 1.803 billion yuan distributed over the past three years [2]. Stock Market Activity - As of January 15, Bailong Oriental's stock price reached 6.05 yuan per share, with a trading volume of 43.3449 million yuan and a turnover rate of 0.49%. The total market capitalization stands at 9.072 billion yuan [1]. - The stock has seen a net inflow of main funds amounting to 4.3258 million yuan, with significant buying activity from large orders [1]. Shareholder Structure - As of September 30, 2025, the number of shareholders for Bailong Oriental decreased by 11.64% to 23,100, while the average number of circulating shares per person increased by 13.17% to 64,776 shares [1]. - Among the top ten circulating shareholders, Huatai-PB SSE Dividend ETF holds 36.7711 million shares, an increase of 2.0968 million shares from the previous period [2].

Group 1 - The core viewpoint of the news is that Bailong Oriental's stock has experienced fluctuations, with a current price of 5.92 yuan per share and a market capitalization of 8.877 billion yuan, while the company has shown a mixed performance in revenue and profit [1] - As of September 30, 2025, Bailong Oriental reported a revenue of 5.724 billion yuan, a year-on-year decrease of 5.76%, while the net profit attributable to shareholders increased by 33.23% to 550 million yuan [1] - The stock has seen a year-to-date increase of 2.25%, with a 13.63% rise over the past 20 trading days [1] Group 2 - Bailong Oriental has distributed a total of 4.187 billion yuan in dividends since its A-share listing, with 1.803 billion yuan distributed in the last three years [2] - As of September 30, 2025, the top ten circulating shareholders include Huatai-PB Shanghai Composite Dividend ETF, which increased its holdings by 2.0968 million shares, while Hong Kong Central Clearing Limited reduced its holdings by 2.1586 million shares [2] - New shareholder E Fund Hong Kong Stock Connect Dividend Mixed A has entered the top ten circulating shareholders with a holding of 5.8893 million shares [2]

Group 1 - The core viewpoint of the news is that Bailong Oriental has shown significant trading activity and financial performance, with a notable increase in net profit despite a decrease in revenue [1][2]. Group 2 - As of January 9, Bailong Oriental's stock price increased by 1.53%, with a trading volume of 78.29 million yuan. The financing buy-in amount was 16.29 million yuan, while the net financing buy-in reached 8.54 million yuan [1]. - The total financing and securities balance for Bailong Oriental as of January 9 was 78.86 million yuan, with the financing balance accounting for 0.88% of the circulating market value, indicating a high level compared to the past year [1]. - On the short-selling side, Bailong Oriental had a short-selling repayment of 1,000 shares and a short-selling amount of 1,400 shares, with a total short-selling balance of 2.57 million yuan, which is low compared to the past year [1]. Group 3 - As of September 30, the number of shareholders for Bailong Oriental was 23,100, a decrease of 11.64% from the previous period. The average circulating shares per person increased by 13.17% to 64,776 shares [2]. - For the period from January to September 2025, Bailong Oriental reported a revenue of 5.72 billion yuan, a year-on-year decrease of 5.76%, while the net profit attributable to the parent company was 550 million yuan, reflecting a year-on-year growth of 33.23% [2]. Group 4 - Bailong Oriental has distributed a total of 4.19 billion yuan in dividends since its A-share listing, with 1.80 billion yuan distributed over the past three years [3]. - Among the top ten circulating shareholders as of September 30, 2025, Huatai-PB SSE Dividend ETF ranked sixth with 36.77 million shares, an increase of 2.10 million shares from the previous period. Hong Kong Central Clearing Limited ranked eighth with 15.63 million shares, a decrease of 2.16 million shares [3].

Investment Rating - The report maintains an "Outperform" rating for the industry [4] Core Insights - In January, international pulp prices increased, with Arauco softwood pulp rising by $10 to $710 per ton and hardwood pulp by $20 to $590 per ton, providing cost support and potential stabilization in paper prices [3][5] - The report highlights the upcoming announcement from the U.S. regarding the tariff decision related to Trump's global tariff measures, which could impact the export chain [3][5] - E-commerce performance in December for personal care products showed overall weakness, with some emerging brands maintaining rapid growth [3] Summary by Sections Export Chain - The U.S. is expected to announce the tariff decision next week, with a predicted 28% chance of supporting current tariffs. If rejected, tariffs imposed in 2025 may be lifted [5] - The postponement of tariffs on upholstered furniture and cabinets until 2027 may alleviate CPI increases in the U.S. and support demand recovery [5] - Companies like Dream Lily and Fashion Bed Group are expanding into the Canadian market, while Zhongxin Co. plans to establish a factory in the U.S. to enhance global competitiveness [5] Home Furnishing - The furniture manufacturing industry's revenue from January to November 2025 decreased by 9.1% year-on-year, with a widening decline in residential sales [5] - IKEA announced the closure of several stores in China while shifting focus to smaller stores and online channels [5] - The report suggests that despite the ongoing adjustment period in the home furnishing and real estate sectors, valuations are at historical lows, presenting potential investment opportunities [5] Paper and Packaging - As of January 9, 2026, prices for various paper types showed mixed trends, with some prices remaining stable while others decreased [5] - The report recommends focusing on companies with strong production capacity and fiber supply, such as Nine Dragons Paper and Shanying International [5] Consumer Goods - Sales growth for sanitary napkins on major e-commerce platforms showed a decline, while some brands on Douyin experienced rapid growth [5] - The report highlights strategic collaborations and product launches by companies like Morning Glory and the potential for recovery in the stationery sector [5] New Tobacco Products - New regulations regarding non-combustible nicotine products will take effect in April 2026, indicating a shift towards a more concentrated market structure [5] - Companies like Smoore International are expected to benefit from the global rollout of their products [5] Textile and Apparel - The textile and apparel sector underperformed the market, with a reported increase in net profit for companies like Bailong Oriental, driven by strong order volumes [5]

Summary of Baolong Oriental Conference Call Company Overview - **Company**: Baolong Oriental - **Industry**: Textile Manufacturing Key Points Sales Performance - In Q4, Baolong Oriental's shipment volume increased by approximately 21% year-on-year, with annual sales growth of about 5% [2][3] - The company implemented price reductions and inventory clearance strategies in the second half of the year, resulting in double-digit sales growth and reversing the decline caused by tariffs in the first half [2][3] Product Mix and Profitability - The proportion of colored yarn in Q4 rose to over 40%, improving gross margins due to declining costs and price recovery [2][4] - Despite a significant increase in colored yarn sales in Q4, the total volume for the year remained below last year's levels [2][4] - The rapid shipment of gray yarn has led to inventory saturation, extending delivery times [2][4] Domestic Operations - Domestic factories reported a narrowing of losses in Q4, nearing full production capacity with delivery times restored to 20-30 days [2][5] - The low gross margins in the first three quarters may lead to inventory impairment provisions at year-end [5] Demand and Pricing Trends - Increased demand and price recovery are attributed to concentrated customer orders before and after Christmas, low downstream inventory levels, and competitive overseas cotton prices [2][6] - The company is actively sourcing U.S. and Australian cotton to meet future demand and lock in cost advantages [2][7] Client Relationships - Uniqlo's order share has significantly increased, while Nike and Adidas orders remain stable [2][9] - Brand clients are raising their requirements for raw materials and delivery times, pushing yarn manufacturers to enhance competitiveness [9] Future Outlook - The company holds a positive outlook for 2026, expecting to achieve a net profit of between 600 million to 700 million yuan [3][20] - The anticipated performance aligns with the expected range outlined in the profit forecast [20] Market Dynamics - The company expects continued growth in orders, particularly in the first half of 2026, with a backlog of orders extending into the new year [15][21] - The demand in the U.S. and European markets is optimistic, with significant month-on-month order growth observed in Q4 [12] Competitive Landscape - Baolong Oriental differentiates itself from competitors by focusing on mid-to-high-end yarn products and leveraging its production capabilities in Vietnam [17] - The company benefits from lower labor costs and the use of overseas cotton, enhancing its competitive position [17] Raw Material Management - The company has been proactive in raw material procurement, ensuring stable production and cost advantages amid low raw material prices [7][16] - The product mix has shifted towards blended products, reflecting market trends [18] Financial Considerations - Government subsidies and exchange rate fluctuations have minimal impact on the company, with positive contributions from currency movements noted in recent reports [22] - The company anticipates stable growth in operating profit and maintains a competitive dividend policy [23] Overall Outlook - The future development prospects for Baolong Oriental are viewed positively, with expectations for continued upward growth [24]

Group 1 - The company, Bailong Oriental (601339.SH), has exported yarn products to EU countries in the past two years, although the overall proportion is small [1]