GF SEC: Textile manufacturing performance accelerated in the first three quarters versus the first half; apparel and home textiles segment slowed somewhat

GF SEC released a research report stating that for the textile manufacturing sector, it recommends focusing on: (1) leading manufacturing companies within the sector, with optimism that second-half performance is expected to improve sequentially, as the year-earlier base was further lowered by the impact of shared tariffs, external demand is recovering, Middle East geopolitical risks are weakening, and raw material price fluctuations are gradually being passed downstream. (2) leading companies in the price-increase chain within the sector, benefiting from tight Australian wool supply and improved cotton supply-demand dynamics at home and abroad, which bodes well for leaders in the cotton textile and wool textile industries. (3) traditional companies leveraging technology homology advantages to expand into high-end materials and embrace new quality productive forces. GF SEC's main views are as follows: Textile manufacturing sector performance accelerated in the first three quarters versus the first half; apparel and home textiles segment slowed somewhat For 2024/2025/2026H1/2026Q1-3, textile and apparel industry revenue grew year-on-year by +1.4%/+1.0%/+7.2%/+6.5%, respectively, of which the textile manufacturing sector grew by +9.3%/+0.1%/+9.1%/+9.7%, respectively, and the apparel and home textiles segment grew by -3.2%/+1.5%/+6.0%/+4.3%, respectively. For 2024/2025/2026H1/2026Q1-3, textile and apparel industry non-recurring net profit attributable to parent grew year-on-year by -18.6%/-3.9%/+22.4%/+20.9%, respectively, of which the textile manufacturing sector grew by +19.3%/+2.3%/+18.2%/+24.4%, respectively, and the apparel and home textiles segment grew by -34.0%/-8.5%/+25.3%/+18.1%, respectively. Apparel and home textiles segment channel, same-store and online revenue conditions Among apparel and home textiles companies that disclosed relevant data, in 2026Q3, channel counts mostly decreased net versus the beginning of the year, while same-store sales mostly grew year-on-year. In 2026Q1-3, most companies' e-commerce revenue grew year-on-year, and the online revenue share rose versus the same period last year. 2026Q4 outlook The textile manufacturing sector is expected to maintain relatively fast earnings growth. Midstream manufacturing-related companies within the sector still face a low fourth-quarter base, and benefit from overseas brand customers' autumn/winter restocking with downstream demand improving marginally; along with new factory capacity ramp-up, performance is expected to continue improving. Upstream raw material-related companies within the sector are expected to benefit from further increases in cotton and wool prices supported by an expected marginal improvement in cotton supply-demand dynamics and an expected persistently tight wool supply-demand dynamic. The apparel and home textiles segment's performance is expected to be uncertain but still has hope of remaining stable. Although domestic terminal foot traffic and consumer willingness have not yet shown obvious recovery, weather since October has been abnormal with temperatures on the high side in most regions, a warm winter is highly likely this year, and e-commerce accounts for a relatively high share in the fourth quarter, so the final Double 11 performance will affect the quarter's operating results; however, the year-earlier fourth-quarter base was not high, the sector's operating indicators are healthy, inventory pressure is not large, and the 2027 Spring Festival is 11 days earlier than this year, with franchisees' stocking shifted earlier, constituting a positive. A-share recommendations Zhejiang Weixing Industrial Development, Huali Industrial Group, Anhui Korrun, Zhejiang Jasan Holding Group, Zhejiang Xinao Textiles Inc., Bros Eastern Co.,Ltd, Fuchun Dye and Weave Group, Zhejiang Taihua New Material Group, Shandong Nanshan Fashion Sci-Tech, Jiangsu Hanvo Safety Product, Xingye Leather Technology, Sunvim Group, Fujian SBS Zipper Science & Technology, Zhejiang Hangmin, etc. Hong Kong stock recommendations: CRYSTAL INTL, SHENZHOU INTL, YUE YUEN IND, etc. For the apparel and home textiles segment, recommendations: (1) high-end brand leaders that have consistently led the industry since the beginning of the year, benefiting from K-shaped consumption divergence and the collective volume growth of high-ticket-price online bands, and outdoor sub-sector leaders benefiting from the industry's high prosperity. (2) home textiles sub-sector leaders, menswear sub-sector leaders, and childrenswear sub-sector leaders with stable industry competitive dynamics, solid leadership positions, and high dividend yields. (3) industry leaders within the sector involved in new consumer businesses such as IP licensing and cultural-creative craft products. Biem.L.Fdlkk Garment, Luolai Lifestyle Technology, Beijing Sanfo Outdoor Products, Shenzhen Ellassay Fashion, Dazzle Fashion, Lancy Co.,Ltd., Hla Group Corp., Youngor Fashion, Zhejiang Semir Garment, Shanghai Shuixing Home Textile, Shenzhen Fuanna Bedding and Furnishing, Jinhong Fashion Group, Ningbo Peacebird Fashion, Winner Medical, etc. Hong Kong stock recommendations: JNBY, BOSIDENG, ANTA SPORTS, LI NING, 361 DEGREES, XTEP INT'L, TOPSPORTS, EEKA FASHION, CHINA LILANG, BEAUTYFARM MED, etc. Risk warnings Risks of macroeconomic downturn, exchange rate fluctuations, and sharp raw material price fluctuations.