Zhongtai Securities: Home Textile Big Items Drive Growth, Apparel Industry Sees Gradual Recovery on Low Base

Stock News11-18

Zhongtai Securities released a research report stating that in Q3 2025, the sportswear industry experienced demand divergence due to warm autumn weather and weak consumption. Running/outdoor categories maintained strong momentum, with online channels outperforming offline. The home textile sector showed moderate recovery, but leading companies achieved above-industry growth through big-item strategies. For instance, Mercury Home Textile accelerated revenue growth by 20.19% in Q3, driven by successful tech-functional products like the "Ice Cream Quilt" and "Ergonomic Pillow," which also lifted gross margin by 4.2 percentage points YoY to 44.74%. Meanwhile, the apparel industry saw gradual recovery on a low base, with men’s wear remaining stable but facing profit pressure, while women’s wear showed signs of improvement, with cost optimization being key.

**Sportswear: Demand Divergence Highlights Resilience** Warm autumn and sluggish consumption led to uneven demand, with running/outdoor categories thriving. Online sales outperformed offline. - **ANTA SPORTS (02020)**: Core brand sales grew by low single digits YoY, while FILA saw similar growth. Other brands surged 45–50%, demonstrating the resilience of its multi-brand matrix. - **LI NING (02331)**: Inventory-to-sales ratio stood at 5–6 months, with year-end discounting expected to improve inventory levels. - **XTEP International**: Core brand sales rose by low single digits, while sub-brand Saucony grew over 20%. - **361 Degrees**: Offline and e-commerce sales increased 10% and 20% YoY, respectively, with super stores expanding to 93 locations.

**Home Textiles: Big-Item Strategy Drives Growth and Profit Recovery** The sector’s recovery was modest, but leaders like Mercury Home Textile and Luolai Lifestyle outperformed. Mercury’s Q3 revenue jumped 20.19%, with gross margin up 4.2 ppts, while Luolai’s sales rose 9.90%, with gross margin improving 3.8 ppts to 48.05%. Both companies saw Q3 net profits surge 43.18% and 50.14%, respectively. Fuanna, still adjusting channels and reducing inventory, plans to launch memory pillows and fitted sheets in early 2026 to broaden its consumer base.

**Apparel: Gradual Recovery on Low Base, Q4 Peak Season in Focus** - **Men’s Wear**: Hla Group posted steady growth, while Biem.L.Fdl and Saint Angelo faced profit pressure. - **Women’s Wear**: Brands like Dazzle Fashion and Ellassay showed recovery signs, with cost control critical. - **Mass Market**: Semir reported growth in Q3, while Peacebird turned a loss amid restructuring.

**Investment Recommendations** 1) **Sportswear**: Favor ANTA SPORTS (02020), LI NING (02331), XTEP, and 361 Degrees for their resilience and growth potential. 2) **Home Textiles**: Prefer Mercury Home Textile (603365.SH), Luolai Lifestyle (002293.SZ), and Fuanna (002327.SZ) for their big-item strategies and dividend appeal. 3) **Apparel**: Focus on Hla Group (600308.SH), Semir (002563.SZ), and Jinhong Group (603518.SH) for recovery and new business growth.

**Risks**: Macroeconomic volatility, slower-than-expected domestic demand recovery, and data discrepancies.

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