Stable foreign trade rules are expected to be introduced textile sector valuation repair opportunities or.

Following the introduction of the State Council's measures to promote the stable development of exports on July 24, the Ministry of Commerce, the General Administration of Customs and other relevant departments are formulating more specific implementation rules around the stable foreign trade policy. Sources said that these rules are expected to be introduced intensively in the near future. Analysts pointed out that the foreign trade support policy is conducive to reducing the foreign trade costs of export enterprises, reducing the expectation of RMB appreciation, and benefiting export-oriented industries such as textile and clothing. Among A- share textile listed companies, Lianfa shares and Huafu color spinning are expected to obtain valuation repair opportunities.
 
Lianfa Co., Ltd. is a cotton spinning enterprise integrating spinning, dyeing, weaving, finishing and garment making. Mid-range products account for more than 70% of yarn-dyed fabrics. Last year's net profit was 0.23 billion yuan. In 2013, the company's performance growth rate is expected to reach more than 30%. Based on the current stock price, the dynamic P/E ratio of the stock this year is only about 9 times. After the company's listing, the gradual release of fund-raising and production energy effectively drives performance growth, the company's growth is catching up with the leading enterprises in the same industry. The gross margin is relatively stable due to the fact that the cotton yarn raw material used in its products fluctuates less than cotton and the proportion of its own purchases is as high as 40%. Analysts believe that, benefiting from the improvement of industry concentration in the future and the benefits brought by foreign trade support policies, the valuation advantage of Lianfa shares has emerged. Judging from the recent trend of the stock, it also seems to have embarked on the road of valuation repair.
 
However, compared to Lutai A, the stock is not in a strong trend. Lutai A, which focuses on the middle and high-end shirt fabric industry, has already started ahead of schedule. The company reduces raw material costs by purchasing foreign cotton and home-grown cotton, with high and stable profit levels. The company controls the core value of the industrial chain, has core competitiveness, and has become the core supplier of international brands. The stock has been quietly out of a wave of Mavericks this year.
 
Some market participants believe that the rising labor costs and the price difference between domestic and foreign cotton have significantly weakened the relative price advantage of China's textiles. Small cotton textile enterprises with low profits are facing great pressure. The industry reshuffle continues, and more orders are concentrated to leading enterprises with cost control and technology research and development advantages. With the acceleration of industry integration, the stimulus of favorable policies, and the warming of the external economic environment, the textile industry may usher in a considerable wave of valuation repair in the future.