Investment Rating - Neutral rating for the textile and apparel industry as of December 21, 2025 [1] Core Insights - The textile and apparel sector outperformed the market, with the SW textile and apparel index rising by 2.2% from December 15 to December 19, 2025, surpassing the SW All A index by 2.4 percentage points [1][3] - Nike's revenue for FY26Q2 reached $12.4 billion, marking a 1% year-on-year increase, indicating a positive recovery trend in performance [2][9] - The Australian wool price index has shown significant increases, with a year-on-year rise of 39.9% as of December 18, 2025, suggesting a bullish cycle for wool prices [2][37] Summary by Sections Industry Performance - The textile and apparel sector demonstrated strong performance, with the SW apparel and home textiles index increasing by 2.7%, and the SW textile manufacturing index rising by 1.6% during the same period [1][3] Recent Industry Data - Retail sales for clothing, shoes, and textiles in China totaled 1.3597 trillion yuan from January to November 2025, reflecting a year-on-year growth of 3.5% [2][27] - In November 2025, China's textile and apparel exports amounted to $23.87 billion, a decline of 5.2% year-on-year, with apparel exports specifically down by 10.9% [2][31] Key Company Insights - Nike's performance recovery is expected to positively influence the manufacturing chain, with significant contributions to revenue from its supply chain partners [2][9] - The North American market for Nike has returned to growth, while the Greater China region is undergoing structural adjustments [2][9] Market Trends - The Australian wool production forecast has been revised downwards, with an expected production of 244,700 tons for the 2025/26 season, a decrease of 12.6% from previous estimates [2][9] - The apparel sector is advised to focus on companies like Bosideng, which is expected to benefit from seasonal demand and a favorable sales window due to the delayed Chinese New Year [2][10]

Investment Rating - The report maintains a "Buy" rating for the company [6] Core Views - In the short term, the company's performance is expected to be under pressure, but there is potential for recovery in 2026 due to the release of overseas production capacity and growth in automotive leather demand [2][10] - The company has entered the supply chains of global sports brands like Adidas and VF, which could open up growth and valuation opportunities in the long term [2][10] - New businesses such as Hongxing and Baotai are in a high growth phase, driven by platform advantages and a favorable industry environment, contributing to the company's expected growth [2][10] Financial Summary - For the first three quarters of 2025, the company achieved revenue of 2.01 billion yuan, a slight increase of 0.01% year-on-year, but the net profit attributable to the parent company decreased by 64% to 40 million yuan [4][10] - In Q3 2025, the company reported revenue of 670 million yuan, a decrease of 10% year-on-year, with net profit attributable to the parent company dropping by 84% to 8 million yuan [4][10] - The projected net profits for 2025 to 2027 are 80 million yuan, 130 million yuan, and 150 million yuan, respectively, with year-on-year changes of -44%, +62%, and +15% [2][10]

Investment Rating - The report maintains a "Buy" rating for the company [2][6]. Core Views - In the short term, the company's performance is expected to be resilient due to the release of overseas production capacity and the growth of new customers in the automotive leather segment. In the long term, the expansion into the sports industry supply chain, having entered global brands like Adidas and VF, is anticipated to unlock growth and valuation potential. New businesses such as Hongxing and Baotai are positioned for high growth due to industry prosperity, contributing to the company's expected growth [2][5]. Financial Performance Summary - For the first half of 2025, the company achieved revenue of 1.34 billion yuan, a year-on-year increase of 6%, but the net profit attributable to the parent company decreased by 45% to 31 million yuan. In Q2 alone, revenue was 710 million yuan, with a similar year-on-year growth of 7%, while net profit dropped by 45% to 12 million yuan [4][5]. - By business segment, the main domestic sales were a drag on revenue, while automotive leather continued to show impressive growth. The shoe and bag segment saw a slight revenue decline of 0.1% to 850 million yuan, primarily due to weak domestic orders. In contrast, the automotive leather segment reported a 30% increase in revenue to 380 million yuan, driven by strong sales from core customers [5]. Profitability Insights - The overall gross margin in Q2 slightly decreased by 0.2 percentage points to 20.3%. The increase in management expenses and inventory impairment losses negatively impacted profits, with the net profit margin dropping by 1.7 percentage points to 1.7% [5]. Future Profit Forecast - The company forecasts net profits attributable to the parent company for 2025 to 2027 at 120 million, 160 million, and 190 million yuan, respectively, with year-on-year changes of -14%, +34%, and +19%. The corresponding price-to-earnings ratios are projected to be 32, 24, and 20 times [2][5].