Overview - The non-woven fabric industry in China is experiencing a recovery, with production expected to reach 8.56 million tons in 2024, a year-on-year increase of 5.1%, marking the largest growth since 2020 [9][25] - The industry is seeing a shift towards high-end and sustainable materials, with the penetration rates of viscose, cotton, and blended materials increasing significantly [30][32] - The industry’s prosperity index has improved from 57.3 at the end of 2022 to 68.4 in the first eleven months of 2024, indicating a positive trend in revenue and profit growth for major companies [9][34] Product Segmentation - The main production processes for non-woven fabrics in 2024 are spunbond (45.3%), needle-punched (21.6%), and spunlace (19.4%), which together account for 86% of the market [26][28] - Spunlace non-woven fabrics are expected to grow by 8.1% year-on-year in 2024, primarily used for wet wipes and toilet paper, while thermal bonded non-woven fabrics are projected to grow by 7.9% [9][28] Market Dynamics - The domestic market is the core consumption area, with a projected increase in domestic sales of non-woven fabrics by 3% in 2024, surpassing 7.14 million tons [52] - Exports are expected to outperform domestic sales, driven by the recovery of the disposable cleaning products market and increasing demand from Southeast Asia [52] Competitive Landscape - The industry is characterized by low concentration, with over 85% of companies being small to medium-sized enterprises, while major players like Nobon, Yanjing, and Jinchun hold less than 1% market share each [10][41] - The competition is intensifying, particularly in the high-end product segments, as consumer demand shifts towards higher quality and sustainable options [41][44] Policy and Brand Strategies - Recent policies in the UK and EU are pushing for a transition to plastic-free products, which may benefit companies capable of producing compliant materials [12] - Major brands are adopting procurement strategies that favor suppliers with strong capabilities in non-plastic materials, enhancing China's competitive edge in the Asia-Pacific and emerging markets [12][51]

Investment Rating - The report maintains a "Positive" investment rating for the textile and apparel industry, highlighting the resilience of the sports segment amidst fluctuating demand [2]. Core Insights - Domestic demand is recovering amidst fluctuations, while external demand is weakening. Retail sales in the textile and apparel sector showed a year-on-year growth of 2.9% to 940 billion yuan from January to August 2025, with a recovery trend noted in August [3][12]. - The sportswear segment demonstrates strong demand resilience, with leading brands like Anta and Li Ning outperforming expectations in the first half of 2025 [3][24]. - The textile manufacturing sector is facing challenges due to geopolitical tensions and rising costs, but certain segments, such as non-woven fabric, remain robust [4][5]. Summary by Sections 1. Industry Overview - Domestic retail sales in the textile sector grew by 4.6% year-on-year to 32.4 trillion yuan in the first eight months of 2025, with apparel sales increasing by 2.9% [3][12]. - External demand weakened, with textile exports declining by 5.0% year-on-year to 26.54 billion USD in August 2025, driven by reduced "export grabbing" and order shifts [3][16]. 2. Hong Kong Sports Segment - The sports segment in Hong Kong showed strong performance in H1 2025, with Anta's revenue increasing by 14% to 38.54 billion yuan and Li Ning's revenue growing by 3% to 14.82 billion yuan [3][24]. - The segment's resilience is attributed to effective inventory and discount management strategies [24]. 3. Textile Manufacturing - The midstream manufacturing sector reported stable order intake, with leading companies like Shenzhou International achieving a revenue growth of 15% in H1 2025 [3][4]. - The upstream textile sector faced challenges due to cautious ordering and weak expectations, with companies like Weixing and Xin'ao reporting revenue declines [3][5]. 4. Men's and Women's Apparel - Men's apparel showed stable revenue performance, but profit margins were pressured due to increased marketing and expansion costs [3][21]. - Women's apparel revenue stabilized, with notable performance from brands like Ge Li Si, which saw a 4% increase in comparable revenue [3][21]. 5. Children's Apparel - The children's apparel segment faced pressure on profits due to increased investment, despite stable revenue growth of 3% for brands like Semir and Jiama [3][21]. 6. Home Textiles - The home textiles sector experienced overall performance pressure due to the domestic consumption environment, with companies like Luolai and Mercury reporting mixed results [3][21]. 7. Investment Analysis - The report suggests that consumer promotion policies are expected to boost brand demand, with a focus on selecting resilient segments within the textile industry [3][4]. Recommended stocks include Anta, Li Ning, and Shenzhou International among others [3][4].