In recent days, listed textile and clothing companies have released their mid-year performance reports. A close look at these reports reveals that while some firms have posted strong results for the first half of 2010, others have struggled. Several domestic securities firms have also issued analyses of these mid-term reports, aiming to provide investors with useful insights.
As the economy gradually stabilizes and shows signs of recovery, what is the current situation for listed textile and clothing companies in the first half of this year?
Overall, the textile and apparel industry has shown a positive trend. Leading manufacturing companies have outperformed expectations, while brand-name firms have seen steady growth. Home textile companies have relied heavily on rapid expansion, while apparel companies have focused more on internal growth and improving gross margins to drive net profit increases.
According to Shenyin Wanguo Securities, key companies in the sector saw a 37% year-on-year increase in net profit, meeting expectations. Their analysis of the first-half results of major textile and apparel companies showed an overall strong growth rate, with 60% of key companies reporting net profit growth above 30%. This aligns with their projected 38% growth for the medium-term outlook.
Analysts from Shenyin Wanguo noted that manufacturing companies exceeded expectations, largely due to a 22.9% year-on-year increase in textile and clothing exports from January to July. Higher-than-expected export volumes contributed to better-than-anticipated results for leading manufacturers such as Lutech A, Huafu Spuntex, and Weixing, which all reported growth rates above 40%.
Brand-name companies also showed consistent growth, with home textile firms experiencing growth between 30% and 60%, and apparel companies seeing growth between 30% and 40%. Home textile companies have expanded quickly, with companies like Mengjie Home Textiles, Fu Anna, and Luolai Home Textile opening 6% to 10% more stores in the first half of the year. Apparel companies, on the other hand, have focused on internal growth, including expanding their store networks and improving gross margins.
From the mid-year reports, several companies have exceeded expectations, including Luolai Home Textiles, Xinao Bird, Luthai A, Weixing, and Pathfinder. On the flip side, companies like Mengjie Home Textiles, Saturdays, and Shanghai Jahwa have underperformed.
Currently, the 2010 P/E ratio for home textile companies ranges from 44 to 48 times. Rollei Home Textiles stands out as the top performer, with its annual results still exceeding expectations. For apparel companies, the P/E ratio is between 30 and 36 times, suggesting potential for further growth.
Notably, Smith Barney and Midrand announced improved third-quarter performance, with growth rates higher than in the second quarter. In the first half of the year, the company’s revenue reached 2.542 billion yuan, up 39.49% year-on-year. After adjusting for non-recurring gains and losses, net profit was 27.93 million yuan, down 85.92% year-on-year. However, the third quarter may mark a turning point, with net profit expected to grow by 0% to 20% from January to September. This makes it a reversal-type company. Before the mid-year report, its performance was driven by sentiment, but once the actual results became clear, it could return to its intrinsic value. Currently, Baoxiu is undervalued, with a 2010 P/E of 30 times. The third-quarter report is expected to show growth of 40% to 60%, with annual growth below 40%.
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