Shenwan Hongyuan Group: Improvement in domestic demand is an important bullish signal for the next 25 years. The stock price of high-quality blue-chip companies is significantly undervalued.

Shenwan Hongyuan Group released a research report stating that the improvement in domestic demand is an important bullish signal for the next 25 years, and high-quality national brands are beginning to reverse their difficulties. The textile manufacturing industry has been temporarily disrupted by the impact of US "equal tariffs", causing significant price declines in high-quality blue-chip stocks, and it is recommended to focus on positive long-term factors in pricing. The bank recommends: sports outdoor, home textiles children's clothing, men and women's wear growing brands, textile manufacturing, and new quality transformation directions, focusing on new materials (ultra-high molecular weight polyethylene), AI+, and other trends. The key points of Shenwan Hongyuan Group are as follows: Steady improvement in domestic consumption, sports equipment leading growth, and noticeable effect of "grabbing exports" in external demand. 1) Domestic demand: According to the National Bureau of Statistics, in the first quarter of the 25 years, China's retail sales of clothing, shoes, hats, and textile goods totaled 369.4 billion, a year-on-year growth of 2.5%, continuing a mild recovery. The demand for sports equipment has performed well, with retail sales of sports and entertainment products reaching 30.7 billion in the first quarter, a year-on-year growth of 14.2%, the fastest growth among all subcategories in the first quarter. Following the boost from domestic economic policies, clothing consumption is expected to continue to steadily improve. 2) External demand: According to the General Administration of Customs of China, China's textile and apparel exports in the first quarter totaled 66.28 billion US dollars, an increase of 1% year-on-year, with textile exports reaching 33.27 billion US dollars, a 4% increase, and apparel exports totaling 33.01 billion US dollars, a 1.9% decrease. In March, China's textile and apparel exports reached 23.4 billion US dollars, a 12.9% increase, with textile exports at 12.05 billion US dollars, a 16.4% increase, and apparel exports at 11.35 billion US dollars, a 9.4% increase. Despite tariff disruptions, the phenomenon of "grabbing exports" remains noticeable, driving a significant rebound in textile exports in March. Hong Kong stocks in the sports sector Revenue continued to improve in the first quarter, with business trends improving. In 25Q1, both the Anta brand and FILA brand under Anta achieved high single-digit growth in revenue, with new brands contributing over 65% of strong growth, performing better than expected, once again demonstrating Anta Group's strong adjustment capabilities. The company acquired the German outdoor brand Kappa for 290 million US dollars, adding another move to its outdoor matrix layout, actively seizing the strategic opportunities of high growth dividends in the industry and expanding into the European market. 361 DEGREES achieved 10-15% growth in adult/children's clothing both online and offline, with a 35-40% growth in e-commerce, continuing to lead the industry with its high quality-price ratio and e-commerce strategy. LI NING is expected to achieve low single-digit growth in retail sales in the first quarter, with stable inventory. In January, it officially became the official sportswear partner of the Chinese Olympic Committee and the Chinese sports delegation for 2025-2028, reshaping its brand influence. Men and women's children's clothing Men's and women's clothing are still recovering, and children's clothing may start a new growth point. 1) Men's clothing: It is expected that in 25Q1, Biem.L.Fdlkk Garment, Baoxiniao Holding, and Hla Group Corp. will see revenue growth of +5%/-2%/+3%, with net profits remaining flat/-10%/flat. Hla Group Corp.'s rapid deployment of its JD Outlet business is a key focus for 25. 2) Women's clothing: With stronger optional attributes, revenue declines are generally larger than in men's clothing. Additionally, rigid expenses such as direct sales channels result in higher operating leverage. Ningbo Peacebird Fashion and Jinhong saw revenue decreases of -8%/3% in 25Q1, with net profits down -22%/-15%. 3) Children's clothing: In 24, China's new births totaled 9.54 million, an increase of 520,000 year-on-year, driving continuous demand for infant and children's clothing. Coupled with the continuous implementation of national birth policies, top children's clothing brands are expected to start a new round of growth. In 24, Semir and Jiaman are expected to achieve revenue growth of +3%/+10%, with net profits staying flat year-on-year/+12%. Brand home textiles The retail effect of the 25-year national subsidy will still be evident, combined with the potential for the double-year wedding market to recover, driving an important turning point in the fundamentals. Luolai is at the end of its destocking phase, and the dual turning points of domestic home textiles and the US furniture business are imminent, with a projected revenue/profit growth of 3%/25% in 25Q1. Mercury is benefiting from the home textile national subsidy, with both revenue and net profit expected to grow by 7% in the first quarter. Shenzhen Fuanna Bedding and Furnishing is expected to see a decline in revenue and net profit in 25Q1. Textile manufacturing The uncertainty of terminal demand and order prospects due to tariff impacts is increasing. 1) Midstream: Large-scale OEMs are deeply tied to top brands, ensuring a relatively stable order position in the supply chain. Huali is expected to achieve a year-on-year revenue growth of +12% and a net profit growth of +20% in 25Q1. In addition, the downstream replenishment of outdoor equipment lags behind clothing, Zhejiang Natural Outdoor Goods Inc. is expected to continue delivering high growth, with revenue expected to grow by +35% year-on-year and net profit by +90% in 25Q1. 2) Upstream: Global supply chain restructuring, increased demand for localized procurement of raw materials, Chinese factories replicating globally, and a continued increase in overseas market share are expected. Weixing/Bailong are expected to see revenue growth of +10%/+0% and net profit growth of +12%/+50% in 25Q1. Risk warning: Consumer recovery below expectations; increasing industry competition; inventory impairment risk; rising raw material costs.