Home textile market operation-weak recovery in 2023

Recently, listed home textile enterprises release 2022 annual report and Q1 2023 report successively.

1. Listed home textile enterprises---lower operating revenue and accumulating inventory

Compared with Aug 2022, market value of 4 home textile enterprises increased, especially Fuanna, which reached a growth of 55.9%. Market value of Luolai was the largest, with a value of 11.3 billion yuan. The growth rate of Mercury and Truelove was at 11-13%, while market value of Mendale and Sunvim shrank by 25% and 16%.

In 2022, except Sunvim, the operating revenue of other 5 enterprises reduced. Luolai had the largest operating revenue, at 5.314 billion yuan, but down 7.75% year on year.

For net profits, except Truelove, net profits deducting non-recurring profit and loss reduced overall in 2022, especially Mendale, down 199% year on year, following Mercury and Luolai, with a reduction of 37% and 22% respectively.  

The inventory turnover of the six brands averaged at 151 days in 2022.

2. Export---exports to EU, U.S. and Japan reduce, while that to ASEAN rise

In 2022, China home textile exports reached 46.048 billion USD, down 3.85% year on year. In 2021, the exports reached the highest as supply chain was steady under the good epidemic control and the home textiles were popular in EU and U.S. since the second half year of 2020. Under the high exports, the exports declined in 2022 with the inflation of EU and U.S., resumption in India and Vietnam, consumption trend change in the post-epidemic era, high inventory in U.S. and high raw material price under the Russia-Ukraine conflict.

For China's major export markets, the development weakness was seen gradually in U.S., EU and Japan, especially U.S., the exports reduced the most, while the exports to ASEAN grew fast.

3. Chinese domestic sales---not buoyant in peak season in 2022 and market competition fierce in 2023

Dieshiqiao Home Textile Market is the largest home textile market in China. From May 2022, Qieshiqiao Prosperity Index and Purchasing Managers' Index have recovered gradually. From Jul, the index began to be close to the level of the same period of 2021. But except 2020, the Prosperity Index during Aug and Nov in previous years was relatively high, while the market sentiment cooled down in peak season in 2022, especially in the fourth quarter, the sentiment was far weaker than the same period of previous years.

4. Market outlook----weak recovery, ordinary in Q2, but may improve in peak season

In 2023, China is in a slow recovery overall. In the first half year, the market recovery mainly depends on own reparation and policy stimulus, and in the second half year, it may need the mild recovery from residents and enterprises. With the demand improvement in wedding and real estate, home textile market is expected to be a weak recovery. For HC PSF market, Chinese domestic sales may improve in the second half year during the peak season, but due to the capacity expansion, supply remains sufficient and market competition is fierce.