According to the Zhitong Finance APP, Shenwan Hongyuan released a research report stating that considering the continuous low base in clothing retail since June last year, it is expected to soon enter a window of accelerated recovery. In terms of external demand and exports, there is a certain degree of economic differentiation in orders from different production areas, especially due to the tariff policies in the United States causing tariff differences among different regions. The bank believes this will further exacerbate differentiation and accelerate the shift. The recovery of domestic demand is an important clue for long positions, exploring new growth directions emerging from low levels; the textile manufacturing sector is temporarily disturbed by the impact of the U.S. &#34;global equivalent tariffs,&#34; but the prices of high-quality blue-chip stocks are oversold, and global competitiveness remains unchanged. It recommends targets related to sports and outdoor activities, discount retail, personal care and home cleaning, domestic home textiles, and sports manufacturing.
<h2>Shenwan Hongyuan's main viewpoints are as follows:</h2>
Moderate recovery in domestic demand is expected to accelerate; external demand is impacted by tariffs, exacerbating economic differentiation
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<li>Domestic demand: From January to May, China's retail sales of clothing, shoes, hats, and knitted textiles reached 613.8 billion yuan (up 3.3% year-on-year), with April and May showing year-on-year growth of 2.2% and 4%, respectively, continuing the moderate recovery trend of Q1 2025. Considering the continuous low base in clothing retail since June last year, the bank expects to soon enter a window of accelerated recovery. 2) External demand: From January to May, China's textile and clothing exports amounted to 116.7 billion USD (up 1% year-on-year), with textiles at 58.5 billion USD (up 2.5% year-on-year) and clothing and accessories at 58.2 billion USD (down 0.5% year-on-year). In contrast, from January to May, Vietnam's textile exports reached 15.1 billion USD (up 12% year-on-year) and footwear exports reached 9.8 billion USD (up 11.5% year-on-year), with growth rates higher than those of China, reflecting a certain degree of economic differentiation in orders from different production areas against the backdrop of the textile supply chain shift, especially as U.S. tariff policies create tariff differences among different regions. The bank believes this will further exacerbate differentiation and accelerate the shift.</li>
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Hong Kong Stock Market Sports
Leading economic conditions, high-performance outdoor activities have high market potential. The strong demand for sports, combined with the outdoor trend, brings structural opportunities, with the sports sector leading in economic conditions and showing a K-shaped differentiation trend, where the high-end and high-cost performance segments are growing better. The bank expects that in Q2 2025, Anta/FILA/outdoor brand revenue will grow year-on-year by mid-single digits/mid-single digits/+40%, with the outdoor brand group continuing to experience ultra-high growth, and the cost-effective brand 361 degrees offline revenue growing year-on-year by 10%, while Li Ning and Xtep's main brand revenue is expected to remain flat/mid-single digits year-on-year. The bank judges that industry inventory remains at a reasonable level, and discounts during the promotional season may deepen slightly.
Men's and Women's Children's Clothing
Most brands are still under pressure, with consumers pursuing quality-price ratios. 1) Men's clothing: It is expected that HLA GROUP's revenue and net profit excluding non-recurring items in Q2 2025 will grow by single digits year-on-year, but considering the non-recurring income from the acquisition of minority shareholders of Sporz in the same period last year, the net profit attributable to the parent company is expected to decline year-on-year, reflecting that the basic operations have resilience, while JD Outlet continues to open stores, which is expected to gradually contribute more. In contrast, high-end men's clothing is expected to see profit pressure and decline in Q2 2025. 2) Women's clothing: Geli Si is performing better than peers, and it is expected that the domestic business will be one of the few women's clothing companies with positive growth, but the handling of overseas business and the EdHardy brand's exit from the market will affect the apparent growth rate of revenue, with profits rebounding significantly on a low base. 3) Children's clothing: It is expected that Semir and Jiaman will achieve flat or slightly increased revenue year-on-year in Q2 2025, but profits will continue to decline, with hopes for the promotion of fertility policies to stimulate maternal and infant consumption
Brand Home Textiles
National subsidies drive better online elasticity, leading to the emergence of blockbuster products. Luolai and Mercury have a higher participation in national subsidies for home textiles, resulting in better performance in a single season. It is expected that Luolai/Mercury's revenue in Q2 2025 will increase by +3%/+15% year-on-year, and the net profit attributable to the parent company will increase by +20%/+6% year-on-year. Luolai's profit is stable, while Mercury is actively investing in expenses. In contrast, Fuanna is still in a period of operational adjustment, and it is expected that both revenue and net profit will decline in Q2 2025.
Personal Care and Household Cleaning
Currently in an opportunity period of diversified demand expansion and quality upgrading. It is expected that Steady and Nobon will see revenue growth of +28%/+20% year-on-year in Q2 2025, and net profit attributable to the parent company will increase by +29%/+30% year-on-year, continuing the high growth trend of Q1 2025. Among them, Nobon benefits from the trend of quality supermarket personal care and household cleaning products becoming self-branded. This year, the business of Pang Donglai is rapidly expanding, and it has successfully entered the supply chain of Yonghui's selected wet toilet wipes, showing strong turning points and high growth, continuously exceeding market expectations.
Textile Manufacturing
Sports manufacturing faces a high base, while the growth logic of new consumer manufacturing chains is good. 1) Midstream: The tariff game is unlikely to cause a major reshuffle in the sports supply chain, and the global competitiveness of leading manufacturers remains unchanged. It is expected that Shenzhou International and Huali Group will see revenue growth of +15%/+9% year-on-year in H1 2025, but the profit growth rate of Huali is expected to be weaker than that of Shenzhou, mainly due to short-term profit margins being dragged down by multiple new factories ramping up. Looking ahead to H2 2025, profit margins are expected to rebound quarter-on-quarter. In the medium term, Shenzhou and Huali are expected to benefit from the future recovery of the Nike chain. 2) Upstream: Due to the greater impact of tariffs on domestic capacity exposure, upstream textile companies are generally experiencing a decline in orders in Q2 2025. It is expected that Weixing, Xin'ao, and Bailong will all see single-digit year-on-year revenue declines in Q2 2025. Bailong benefits from improved cotton price costs and high profitability of Vietnamese capacity, with an expected net profit attributable to the parent company of 190 million yuan (up +25% year-on-year) in Q2 2025, and a cumulative net profit attributable to the parent company in H1 2025 expected to exceed +50% year-on-year, exceeding expectations.
Risk Warning: Consumer recovery may be less than expected; market competition intensifies; tariff risks; exchange rate risks; fluctuations in raw material prices

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Shenwan Hongyuan released a research report indicating that the moderate recovery of domestic demand is expected to accelerate, recommending targets related to sports and outdoor activities, discount retail, personal care and home cleaning, domestic home textiles, and sports manufacturing. It is anticipated that clothing retail will enter a window of accelerated recovery, while external demand is affected by U.S. tariff policies, leading to increased divergence in the economy. From January to May, the retail sales of clothing, shoes, and hats increased by 3.3% year-on-year, and the export value of textiles and clothing grew by 1% year-on-year. The sports sector is leading in terms of prosperity, with brands like ANTA expected to see significant growth in revenue

Shenwan Hongyuan: Mild Recovery in Domestic Demand Awaiting Acceleration, Layout for New Growth Direction in Textile and Apparel