President Xi Xi proposed "new contradictions" and stressed the quality and effectiveness of economic development. By 2020, it will basically achieve the goal of beautiful China. We judge that the environmental protection requirements of the government will be further tightened, the environment will be improved and the economy will be upgraded and upgraded. The environmental pressure on the textile and apparel industry will continue to increase in the future.

Textile and garment industry chain is longer, the pollution mainly concentrated in the dyeing and finishing, water pollution-based, sub-sectors of printing and dyeing, tanning more serious pollution. In our opinion, the impact of tighter environmental protection on the spinning and weaving industry is mainly reflected in two aspects: First, the prices of energy and raw materials in the upper reaches have risen, leading to an increase in the cost chain of the industry chain; secondly, the government directly strengthens the two major segments of printing and dyeing and leather making Industry regulation, to accelerate production capacity, resulting in the industry as a whole affected, but the leading companies are expected to benefit from industry concentration.

Printing and Dyeing Industry: Tightening environmental protection, the leader is expected to enjoy the "dividend"

Printing and dyeing industry threshold is low, the market is fragmented. As the government stepped up its environmental protection requirements, the industry ushered in the supply-side reform. The output of printing and dyeing cloths for enterprises above designated size in 2010-15 dropped from 59.3 billion meters to 51.0 billion meters. After 16 years, capacity has rebounded. We judge that with the central government and local governments The government introduced more policies to further improve the environmental standards, the industry will once again enter the capacity contraction period, promote the degree of concentration.

In the long run improve the environmental threshold, will lead to increased investment in small and medium enterprises to exit the industry is expected to further focus, leading enterprises will enjoy the "left who dividend", market share and bargaining power would be enhanced; short term dyes, coal, environmental protection, and the cost of upgrading the There is expected price increases in enterprises.

Leather Industry: Environmental pressure continues to capacity, leading leather will benefit

China's tannery industry overcapacity, market fragmentation, are high-polluting industries, especially tanning, feather (cashmere) processing, the use of solvent-based adhesives or processing enterprises will produce more waste water, waste gas and solid waste.

In recent years, the industry boom down, while the government to strengthen the management of leather industry, to develop a number of standards to improve environmental protection requirements, backward production capacity has been gradually eliminated, after 2010, the number of light leather and tannery enterprises in China showed a downward trend. In July 2017, the MEP classified the leather tanning industry as a permit to issue licenses for industries that require key management and its market share will be further concentrated on leading enterprises.

Investment advice: good environmental protection to lead the production capacity, recommended Hangzhu shares

On the one hand, environmental toughening has resulted in rising upstream costs affecting the overall profitability of the industry chain; on the other hand, it has directly driven the production of printing and dyeing and tanning industries. The leading enterprises are expected to benefit from the industry concentration.

We are optimistic about the environmental protection industry to boost production capacity leading the market share and bargaining power, the first of its kind in printing and dyeing leading aerospace shares, leading leather industry leading technology will benefit, also involved in the other segments of the dyeing and finishing segment leader is also expected to benefit in part . Air China shares which are the leading domestic printing and dyeing, over the years continued to introduce advanced production and environmental protection equipment, industry-leading environmental standards, with environmental protection requirements increase, the competitive landscape optimization, upstream costs increase, the company will promote the marginal price increases and improved performance.