TPP Reached A Basic Agreement, Making Vietnam'S Textile Leader Good.

In October 5th, the 12 countries of the United States, Japan and Vietnam reached a basic agreement on the TPP (trans Pacific Partnership Agreement). TPP negotiations have been going on for many years, and we have made some progress this year. We have repeatedly suggested in the previous report that this conclusion is in line with market expectations.

TPP zero tariff policy has a certain impact on the export of domestic textile and garment industry, but its short-term impact is limited. TPP has a positive impact on leading enterprises in Vietnam with capacity layout. 1) China is a big exporter of textile and clothing: in the first 8 months of 2015, the total export volume of China's textile and garment industry was 184 billion 400 million dollars, and exports accounted for about 30%. The largest share of US exports to TPP countries is Japan, which accounts for about 24% of total exports. 2) zero tariff among TPP member countries, but the impact on China's industry in the short term is limited: Vietnam is also a big exporter of textile products, and the export tariff of TPP is expected to decrease from an average of 17.5% to 0, which will cause some pressure on China's domestic industry. However, we believe that the impact of tariffs on domestic industries will be limited and uncertain in the short term. The main reasons are that the tariff policy of various countries needs to be landed, the progress of China's free trade negotiations has been progressing, and the overall capacity of Southeast Asian capacity is limited. 3) Vietnam's textile leading companies with capacity can benefit directly: domestic textile production capacity has begun to transfer to Southeast Asia in recent years, and leading enterprises such as Lu Tai, Bailong and Huafu have a certain capacity layout in Vietnam, which will benefit directly from the TPP agreement. Zero tariff and overseas production capacity will increase gradually, and the savings in manpower cost and local tax revenue will also contribute to the improvement of profitability.

Baron East: at present Vietnam? Capacity accounted for nearly 1/3, and the future is expected to continue to increase rapidly. Baron Oriental has established a wholly owned subsidiary in Vietnam for 12 years. The first phase of Vietnam's two phase project was completed in the first half of 15 years, and now it is in the commissioning and trial production stage. In the 15 year, Vietnam's production capacity was about 45 thousand tons, accounting for nearly 1/3 of the total capacity of the company. Vietnam's three phase project is also expected to be completed by the end of 16, when Vietnam's capacity is expected to reach 7.5-8 million tons, accounting for over 40%. In view of the fact that the company has lower manpower cost and easier employment in Vietnam, the new capacity in the future is expected to be overseas.

Lu Tai: end of 16 Vietnam fabrics Production capacity will account for about 15%, and overseas production capacity will increase in 15-16 years. 1) Lu Tai invested 15 years in Vietnam to set up a subsidiary (set up by a subsidiary of Hongkong, and then acquired by a listed company). It is estimated that by the end of 15, 60 thousand spindles will be put into operation, and 30 million meters of colored cloth will be put into operation in the 2-3 quarter of 16. 2) another company has shirts layout in Kampuchea and Burma. It is expected that the total production of 6 million shirts will be increased by the end of the year, and the output of overseas shirts will be about 1/3 in the 16 years. The two countries will not be able to exclude the possibility of joining the TPP in the future, except for the advantages of manpower cost and recruitment.

Huafu color spinning: at present, Vietnam's capacity accounts for about 9%, and there is still room for improvement in the future. At the end of 13, the wholly owned subsidiary of Huafu color spinning set up a subsidiary in Vietnam with a planned capacity of 300 thousand yuan. At present, the first stage of the two stages has been completed, with a total capacity of 120 thousand ingots, accounting for nearly 9% of the total capacity of the company's total output of 1 million 350 thousand, and there is room for improvement in the future. In fact, compared to Vietnam, the investment focus of the company is currently enjoying greater policy preferences in Xinjiang.

TPP good in Vietnam has industrial layout. Textile Leader We recommend overseas investment with clear and valuing advantages, such as Lu Tai A & amp; Bailong Orient, focusing on Huafu color spinning. Recommended Lu Tai A (cotton prices are at the bottom of the cycle, 15-16 years of continuous release of overseas production capacity, currently 15 years PE times 13 times), Baron East (Vietnam capacity is a point of view, the future will continue to expand production capacity overseas, 15 PE PE 16 times). It is suggested that we should pay more attention to Huafu color spinning (Xinjiang area has greater investment and subsidies, and is expected to enter the supply chain business in the future. It has made 1:9 leveraged ESOP, and PE is 19 times in the current 15 years).