CITIC Securities: Seize the opportunity of upstream price increases in the textile and clothing industry, layout brands and manufacturing to revive.

The Citic Securities research report states that in 2025, the textile and apparel industry will face pressure on overall profit margins due to trade policy and exchange rate fluctuations, channel structure, and discount pressures. Benefiting from the Spring Festival peak season in 1Q26, the brand clothing sector was the first to see performance improvement, but among textile manufacturing companies, contract manufacturing industries are still facing pressure from exchange rates and rising raw material prices. Looking ahead, we recommend the following investment themes: 1) The price increase of upstream products such as cotton spinning, wool spinning, and chemical fibers is expected to drive the release of inventory profit elasticity. 2) During downturns in the industry, the OEM sector often sees leading companies increasing market share, and with many contract factories gradually entering the value range, the sector is expected to enter a positioning window in 2H26 to 1H27. 3) In the brand clothing sector, drawing from the experience of overseas leading brand companies emerging from the 2008 financial crisis, domestic brands are expected to seize the opportunity for operational improvement brought about by retail recovery. 4) There are many high-dividend and high-dividend stocks in the textile and apparel industry, mainly due to the ability of leading companies in the sector to continuously create stable cash flows and healthy asset conditions. Home textiles, top brands and distributors, and high-quality manufacturing companies have stable and relatively high dividend yield levels, and it is recommended to actively allocate. In addition, we recommend subdivided companies in the textile and apparel sector that have stable main businesses and actively expand new business layouts.