The three factors affecting the cotton price fluctuation, supply and demand, policy and capital, have changed in 2015: after the cotton policy was changed to direct subsidy, the cotton price has dropped by 30% since 2014; After three consecutive years of cotton collection and storage from 2011 to 2013, the domestic cotton reserve scale is now more than 10 million tons, which is at the level of historical daily quantity. Considering that China's annual cotton demand is 6.5 million tons to 7.5 million tons, it is expected that in 2015, the supply will be significantly greater than the demand; As cotton prices approach the historical bottom, enterprises in the industry may enlarge the scale of cotton procurement.

The decline of cotton price affects the short-term performance of enterprises: due to the cautious ordering of customers, the gross profit margin of cotton textile enterprises will encounter some resistance, and the pressure of order volume and gross profit margin will have a certain effect on the performance of cotton textile enterprises in the third and fourth quarters of 2014.

We are optimistic about the recovery of the cotton textile industry chain in 2015. Influenced by three factors: the support of domestic cotton cost, the expectation of supporting policies, and the reasonable range of the difference between internal and external cotton prices between 1500-2000 yuan/ton. Combined with the current cotton price, it is expected that the domestic cotton price will fluctuate in a narrow range from 13000-13500 yuan/ton in 2015, which has basically been at a relatively stable historical low from 2005 to 2008. In 2015, the demand for centralized replenishment of downstream inventory will drive the recovery growth of the industrial chain; In addition, according to historical experience, cotton price fluctuations have a significant cyclical impact on the supply and demand of domestic cotton and the inventory size of enterprises. It is expected that enterprises in the industry will have the power to purchase additional raw materials with the arrival of the historic bottom of cotton prices, further amplifying the performance growth.

In the medium term, the high cost dilemma of cotton textile enterprises since 2010 is expected to start to reverse in 2015: since 2010, cotton textile enterprises have faced the rising high cost dilemma. With the natural growth of human costs, the peak of environmental protection costs, and the decline in the price of cotton as the main raw material, cotton textile enterprises are expected to face the dilemma reversal in 2015 and improve their international competitiveness. In addition, after the early industry integration, the enterprises with small scale and relatively weak operation strength will exit the market competition, and the industry concentration is expected to increase as a whole. After the order and other resources are gathered to the leading enterprises, it is expected that the market share of the leading textile enterprises will be significantly increased.