Both domestic and foreign cotton prices have risen in the near future, and the average reserve price has exceeded 14,000. Looking to the future, despite the sluggish demand in the downstream and the limited reserves in the long-term by the State Reserve, the short-term market will continue until September due to the short-term improvement in throwing stocks, the tight balance between supply and demand, and the reasonable price gap between domestic and foreign cotton prices. Cotton before going public. It is recommended to pay attention to A-shares Huafu Spuntex, Bron East, Luthai; Hong Kong stocks Shenzhou International, Pacific Textiles, Weiqiao Textile.
comment
The rise in domestic cotton prices was mainly due to the shortage of thrown reserves, weather and production cuts. (1) Storage: Storage from the previous market was delayed from March to May, and the public inspection was too slow to affect the amount of thrown reserves; (2) Weather: more delays in the export of State Reserve Cotton, and hail in Xinjiang affected the yield; (3) ) Production Cuts: The sown area of ​​cotton declined by 14.3% in 16 years. Judging from the situation in previous years, the annual cotton prices are concentrated in March (supply logic) and June-July (abnormal weather). We expect the market will continue until September before the listing of new cotton: (1) Quality assurance requirements It is difficult to improve short-term deposits and discharges; (2) In 2015/16, the output of cotton was 4.43 million tons and consumption was 7.64 million tons. The gap between supply and demand was 3.23 million tons. The supply and demand balance before the listing of new cotton in September was tight.
With the increase in cotton prices, the difference between cotton prices inside and outside China is still within a reasonable range. The difference between cotton prices inside and outside the country has reached a record high of RMB 5,000/tonne in the past, and during the previous period, cotton prices fell during the downturn. The increase in cotton prices in the current round was accompanied by high cotton prices, mainly due to the sharp decline in India's supply to the world's largest cotton producer (the area of ​​cotton planted in India hit a new low for 7 years). The current cotton price difference between domestic and overseas is around 1,500 yuan/ton, which we believe is still high. Reasonable range.
The increase in cotton price is conducive to driving up the price of orders and the increase in gross profit rate. The flexibility of color spinning companies is even greater: the impact of cotton prices on the industrial chain is mainly reflected in: (1) Impact on the price of orders: favorable for stronger bargaining power and leading value in cotton pricing Enterprises; (2) Influencing inventory costs: Cotton spinning companies generally reserve 3 months in advance. In the rising cycle of cotton prices, low-cost stocks are expected to benefit and contribute to increase gross profit margin. The cost of cotton accounted for a higher proportion (80%) in color spinning companies such as Huafu Textile and Blum Oriental, and about 60% in Lutai and Shenzhou, but Luteng accounted for 80 in cotton and cotton. %, long-staple cotton prices are still falling due to oversupply.
Valuation and recommendations
Huafu Color Spinning Co., Ltd. and Blumton East have greater flexibility, and the development of new peasants led the rebound in cotton prices.
It is recommended to pay attention to A-shares Huafu Spuntex, Bron East, Luthai; Hong Kong stocks Shenzhou International, Pacific Textiles, Weiqiao Textile. Recommended A shares Lutai (16P/E14 times), H shares Shenzhou International (16P/E17 times), Pacific Textiles (16P/E12 times), Weiqiao Textile (16P/E5 times).
risk
The State Reserve’s reserve of cotton deposits has increased; downstream demand has continued to slump.
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