GF Securities has released a research report noting that for the textile manufacturing sector, investors should focus on: (1) leading manufacturing companies within the sector, which are expected to see sequential earnings improvement in the second half, as the year-ago base was further lowered by the impact of shared tariffs, external demand is recovering, Middle East geopolitical risks are easing, 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 both domestically and internationally, which bodes well for leaders in cotton spinning and wool textile industries. (3) traditional enterprises leveraging technological synergies to expand into high-end materials and embrace new quality productive forces. The main views of GF Securities are as follows:

Textile manufacturing accelerates in the first three quarters versus the first half, while apparel and home textiles slow

For 2024/2025/2026H1/2026Q1-3, the textile and apparel industry's revenue grew year-on-year by +1.4%/+1.0%/+7.2%/+6.5%, respectively. Within this, the textile manufacturing segment grew by +9.3%/+0.1%/+9.1%/+9.7%, while the apparel and home textiles segment changed by -3.2%/+1.5%/+6.0%/+4.3%. For 2024/2025/2026H1/2026Q1-3, the textile and apparel industry's non-recurring net profit attributable to parent changed year-on-year by -18.6%/-3.9%/+22.4%/+20.9%, with the textile manufacturing segment at +19.3%/+2.3%/+18.2%/+24.4% and the apparel and home textiles segment at -34.0%/-8.5%/+25.3%/+18.1%.

Channel, same-store, and online revenue conditions for apparel and home textiles

Among apparel and home textile companies that disclosed relevant data, in 2026Q3, most saw a net decrease in channel count compared to the start of the year, while most recorded year-on-year same-store growth. In 2026Q1-3, most companies saw year-on-year growth in e-commerce revenue, with the online revenue share rising compared to the same period last year.

2026Q4 outlook

The textile manufacturing segment is expected to maintain relatively fast growth. Midstream manufacturing companies within the sector still face a low base in the fourth quarter and are benefiting from overseas brand customers' autumn/winter restocking as downstream demand improves marginally. With new factory capacity ramping up, performance is expected to continue improving. Upstream raw material companies in the sector are expected to benefit from an anticipated marginal improvement in cotton supply-demand dynamics and continued tightness in wool supply-demand, supporting further price increases for cotton and wool. The apparel and home textiles segment's performance is expected to face uncertainty but still has the potential to remain stable. Although domestic terminal foot traffic and consumer willingness have not yet shown clear recovery, weather since October has been abnormal with higher temperatures in most regions and a high probability of a warm winter this year, and the fourth quarter has a high e-commerce share, the final Singles' Day performance will affect quarterly operating results. However, the year-ago fourth-quarter base was not high, sector operating indicators are healthy, inventory pressure is modest, and the 2027 Spring Festival falls 11 days earlier than this year, shifting franchisee stockpiling forward, which constitutes a positive factor.

For A-shares, attention is recommended on Weixing Co., Ltd., Huali Industrial Group, Kairun Co., Ltd., Jiansheng Group, Xin'ao Co., Ltd., Bros Eastern, Fuchun Dye and Weave, Taihua New Material, Nanshan Zhishang, Henghui Security, Xingye Technology, Furi Co., Ltd., Xunxing Co., Ltd., and Hangmin Co., Ltd. For Hong Kong stocks, attention is recommended on Crystal International, Shenzhou International, and Yue Yuen Group.

Apparel and home textiles sector recommendations

For the apparel and home textiles segment, investors should focus on: (1) leading high-end brand companies benefiting from K-shaped consumer divergence and the collective volume growth in high-ticket-price online channels, which have consistently led the industry since the start of the year, as well as leading companies in the outdoor sub-sector benefiting from high industry prosperity. (2) leaders in the home textiles sub-sector, menswear sub-sector, and children's wear sub-sector with stable competitive landscapes, solid leadership positions, and high dividend yields. (3) industry leaders involved in new consumption businesses such as IP licensing and cultural creative craft products. These include Biem.L.Fdlkk, Luolai Lifestyle, Sanfo Outdoor, Ellassay, Dazzle Fashion, Lancy Co., Ltd., Heilan Home, Youngor, Semir Apparel, Shuixing Home Textile, Fuanna, Jinhong Group, Peacebird, and Winner Medical. For Hong Kong stocks, attention is recommended on JNBY Design, Bosideng, Anta Sports, Li Ning, 361 Degrees, Xtep International, Topsports, Yinger Fashion, China Lilang, and Beauty Farm Medical and Health.

Risk warnings

Macroeconomic downturn, exchange rate fluctuations, and significant raw material price volatility risks.