Apparel / Textiles & Accessories

The spread of the epidemic in India has brought knock-on effects to the textile industry chain.

The Indian textile industry occupies a pivotal position in the global textile industry and is the second largest textile producer in the world after China. For the Indian economy, the textile and garment industry is also one of the pillar industries. The textile industry accounts for about 15% of India’s total export revenue.

According to reports, due to the blockade measures during the epidemic, the exports of the Indian garment industry have shrunk severely. In 2020, the exports of the Indian garment industry will decrease by 24%. In the new round of the epidemic, related Indian companies have lost a large number of garment export contracts due to the inability of workers to arrive at their posts.

This brings opportunities to China, the world's largest textile country. A large number of textile orders previously transferred from China to India have begun to return.

"Affected by the epidemic, the textile industry in India and Southeast Asia has stopped, and some orders have been transferred to the country, which has brought some orders to the company." Vosges (002083.SZ) recently replied to investors on the interactive platform.

A 21st Century Business Herald reporter's investigation found that many textile companies have successively received orders from Southeast Asia. However, for this part of the order, the company also maintains a cautious attitude, because once the overseas epidemic improves, the return orders will also leave.

Some companies started operating at full production in the fourth quarter of last year

Vosges is China's largest exporter of home textiles, mainly exporting home textile products such as towels and bedding. At the end of April this year, Vosges shares stated on the investor interaction platform that the company is operating at full capacity and orders have reached July.

The 21st Century Business Herald reporter learned from Vosges that the company's orders are continuing to grow, and it has now been scheduled to August.

The relevant person in charge of the company told reporters, “We have indeed accepted transfer orders from Southeast Asia, most of them are from India, mainly in the middle and low end. However, the number of orders received is not much, accounting for up to 10%. The company’s orders have always been from old customers. Mainly, the proportion of new customers is not large."

The person said that, in fact, the transfer of orders in Southeast Asia began in the second half of last year, and since the first quarter of this year, the return has been slightly obvious. "The epidemic in India has been serious this year. Other overseas customers are worried about the new crown virus on textile products, so they are afraid to place orders in India."

Lianfa (002394.SZ), the global leader in yarn-dyed fabric manufacturing, also mentioned the return of orders. It stated on the interactive platform that the new crown epidemic in Southeast Asia has caused some clothing orders to return to the country, but it emphasized that this is "short-term and limited."

The company also stated that the company's orders are characterized by small batches, multiple varieties, and fast delivery. At the same time, the new crown pneumonia epidemic is still spreading around the world, and the external environment has large uncertainties, so it is difficult to predict the annual order situation.

Blum Oriental, the domestic leader in color spinning, has seen a significant increase in product sales, and achieved a net profit of 223 million yuan in the first quarter, an increase of 213% year-on-year.

In an interview with the media recently, Blum Oriental insiders said that the company had undertaken a wave of return orders in the second half of last year. Since the fourth quarter of last year, the company's order situation has been very good, and it is close to full production. According to the order scheduling situation, it is prudently estimated that the performance in the first half of this year will achieve a sharp increase compared with the same period in 2020 when the base is relatively low, and even better than the same period in 2019 before the epidemic.

While paying attention to the return of orders, investors are also concerned about the production of textile companies in overseas factories. Previously, due to factors such as cost and trade policies, many textile companies chose to set up factories in Southeast Asia.

The shoe manufacturer Huali Group said, “The company does not have a factory in India, and the mass production factory is mainly in Vietnam. The Vietnamese factory has formulated relatively strict epidemic prevention and control measures, and the epidemic control is relatively good.”

Liu Tiantian, chief analyst of the textile and light industry of Dongxing Securities, pointed out that the recent epidemics in Southeast Asia, including Vietnam and Indonesia, have aggravated. The continuous fermentation of the epidemics in these regions will have an impact on the global supply chain. The overseas production bases of Chinese textile companies are mainly in Southeast Asia. Companies that have no epidemics in their factories or that have done a good job in epidemic prevention can better undertake this round of order transfer and are expected to seize the opportunity to expand their production capacity against the trend. The share has been increased.

Backflow is only a short-term bonus

Although there are opportunities for overseas orders to return, in the eyes of many business people, many orders are simply "unprofitable."

“India had a lot of home textile orders returning last year, but those prices were not high and the profits were low. These low-end products are made at a loss, so our business staff will also judge whether to take it. And, let’s look at it now. , This part of the return orders does not have a big impact on performance, but the fluctuation of the RMB exchange rate has a greater impact on the company." A person in charge of a large textile company in Jiangsu told reporters.

The aforementioned person in charge of Vosges also said, “India’s textile production is mainly in the middle and low-end. Because the company still has bargaining power abroad, and its own orders are still too late, so there are options for these transfer orders, and try to choose some. High value-added products to do."

The person said that this part of the transfer order has been pre-judged, and the dividend is definitely temporary. First of all, the number is not large. Once the epidemic situation in India improves, it will still return to India.

Lin Xiangyi, an analyst in the textile and apparel industry of Galaxy Securities, believes that “In the long run, if the epidemic in India is controlled in the future, orders may return to India because India’s costs in terms of manpower, taxation, and trade environment are lower than those of my country. Textile enterprises have obvious advantages in management experience, technical manufacturing, and labor efficiency for many years, which can be used as a favorable basis for domestic textile enterprises to build factories overseas."

But in any case, this epidemic has accelerated the start of a new cycle in the global textile and apparel industry. China is the country with the most complete textile industry chain, and its current advantages are reflected in the stability and security of the supply chain.

"At present, my country's textile manufacturing industry is basically in a mature stage. Leading companies benefit from the increasing trend of industry concentration with their technology, experience, and scale advantages. At the same time, due to the impact of the 2020 epidemic, some small and medium-sized enterprises will clear up, and the industry concentration is expected to further increase. With the rapid upgrading of domestic industrial technology and the increasing rate of machine replacement, the long-term development space for leading domestic textile companies is still broad." Lin Xiangyi said.

The export data also confirms the advantages of China's textile industry chain. According to customs statistics, from January to May this year, the country’s textile and apparel exports totaled US$112.69 billion, a year-on-year increase of 17.3%. Among them, textile exports were US$56.08 billion, an increase of 16.1% over the same period in 2019; in May, clothing exports were US$12.20 billion, a year-on-year increase of 37.1%.