Performance summary: Apparel is now split, and manufacturing is slowing down again. The performance of brand apparel companies generally accelerated in 2011, but there was differentiation in Q1 2012: high-growth performance performed best, menswear grew steadily, home textiles fell short of expectations, and the pressure on leisure leaders has not eased. At the same time, financial indicators have declined, reflecting the pressure on terminal sales due to factors such as abnormal weather and early Spring Festival, sub-sector slowdown, and company operations. The performance growth rate of processing and manufacturing enterprises in 2011 slowed down significantly, and continued to decline sharply in 2012Q1.

Brand clothing: Ql growth rate is the lowest point in the past, Q2 is expected to improve. The growth rate of retail sales of apparel above the quota in 2012Q1 was 14.6%, the lowest in recent years (except for the economic crisis in 2009), but the growth rate in March rose to 19.4% month-on-month, in line with the judgment of the February monthly report. The growth rate of Q2 retail sales is expected to recover to 20%, with a full-year growth rate of 19%.

The third-tier apparel cities have the fastest sales growth, and the home textiles turning point may be in the second half of the year. In 2012Q1, the growth rate of clothing sales in third-tier cities is still the fastest. With the decline in clothing price increases in 2012, the rigidity of sales in third-tier cities is expected to continue. The growth rate of retail sales in bedding third-tier cities exceeded that of the first-line. However, due to factors such as the slowdown in real estate consumption and higher price increases, the growth rate of bedding products was the lowest in the sub-industry. Data from 200 key retail companies showed that the growth rate of retail sales in 2012Q1 was only It is -3.3%, judging the turning point or in the second half.

Processing and manufacturing: sales have rebounded, and performance will be delayed. In 2012Q1, the export growth rate of textiles and apparel was 2.86%, a year-on-year decrease of 21.2pct, due to the year-on-year increase in export prices, and the month-on-month slowdown. However, the drop in price is conducive to the rebound in sales, and the demand for terminal replenishment and the gradual recovery of the US economy have laid the foundation for the recovery of orders in the later period. Judging that the recovery of corporate performance will lag behind the recovery of orders, Q2 performance pressure remains.

Industry rating and investment strategy. The brand apparel sector usually performs weakly in the first and fourth quarters, and has a higher probability of outperforming the broader market in the second and third quarters. Judging that the 2012Q2 apparel terminal sales are expected to pick up, the current dynamic valuation of the sector is 20PE in 2012, which is at a historically low level, maintains the "outperform" rating, and recommends active allocation. Key recommendations: Nine Shepherd King, Seven Wolves, Annunciation Bird, the men's wear sub-industry is booming, and the overall growth rate of the most beneficiary industry has rebounded; the "high-growth four outstanding" pathfinders, Soyut, Kanudi Road, Langzi shares, Higher performance growth is expected to support its valuation. For the processing and manufacturing sector, Jiangnan High Fibre, which has a prominent position in the subdivision industry and a gradual release of production capacity, is recommended.

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