Merrill Lynch, Taiwan: Textile And Shoemaking Families Are Short And Long

Merrill Lynch pointed out that the textile and shoemaking group is expected to continue to perform well in the first half of this year. However, the second half of each factor will fade away. The three major aspects of American clothing, retail sales and exchange rate may turn negative. Therefore, we should first comment on Ru Hong (1476) and Fengtai (9910), respectively, to "worse than big market" and "neutral".

Merrill Lynch's view of the textile shoe supply chain can be set as "short and long sky". In the first half of the year, it was bullish on the three factors, and the order was in good condition. However, at the same time, the risks of several industrial prospects were put forward, and the views in the second half of the year were changed to conservative.

The operational risks in the second half of the year include: the impact of the American Apparel pullout strength on the base period, which may slow down from May, and reduce the supply chain manufacturers' benefit. Secondly, although Merrill still has confidence in the short-term order performance of the textile supply chain, considering the replenishment of the second half of the year, the retail sales performance of the US must be very strong.

Third, the exchange rate has been a positive factor in the revenue and gross margin of textile shoe related supply chain in the past few years. However, under the current interest rate conditions, the advantage of the favorable exchange rate should be peaked in this quarter, and then gradually dissipated throughout the year.

In view of the fact that the order situation was healthy in the first half of the year, Merrill Lynch thought there were three big plus Holdings: 1., the middle and low income consumers in the United States had a good prospect for this year's expenditure.

2. brand factories continue to move their production bases out of the mainland, especially to Southeast Asia to avoid the intrusion of high tariffs between China and the United States.

3. over the past nine months, clothing sales, imports and inventories are still healthy.

In view of the textile stocks Wang Ruhong, Merrill Lynch believes that the operation growth rate of Ru hung in the second half of last year has already dropped from the first half of the year. In the first half of this year, it was affected by the impact of the base period, the UA inventory adjustment of important customers, and the trend of sportswear to life and leisure.

Merrill Lynch criticized the investment of Confucianism and Hong Kong from "buying" to "inferior to the market" and speculated that the reasonable share price would be reduced from 480 yuan to 355 yuan in the next 12 months.