Key investment points:
Current market review
In the current period (01.22 – 02.05), the Shanghai Composite Index closed at 3361.44, down 4.57%; The CSI 300 index closed at 4563.77, down 4.51%; SME 100 closed at 9077.82, down 4.02%; In the current period, Shenwan pharmaceutical and biological industry index closed at 9684.57, down 6.83%, ranking 28th among Shenwan’s 31 primary industry indexes. The seven secondary sectors all outperformed the Shanghai Composite Index, CSI 300 and SME 100.
Important information
On January 27, the 2022 national health work conference was held in Beijing. According to the contents of the meeting, there are mainly eight things to be done in the field of health in 2022. First, promote the healthy development of rural medical and health system; Second, strengthen the capacity-building of grass-roots disease control institutions; Third, strengthen the research and prevention of covid-19 virus mutation; Fourth, promote the high-quality development of public hospitals; Fifth, comprehensively strengthen the service supply of “one old and one small”; Sixth, comprehensively implement the major project of revitalizing and developing traditional Chinese medicine; Seventh, improve the prevention and control strategy of major diseases; Eighth, promote the construction of talent team.
On January 29, the evaluation center of the National Bureau of Health issued the technical guidelines for clinical risk management plan of chimeric antigen receptor T cell (car-t) treatment products for listing
On January 30, the Ministry of industry and information technology, the National Health Commission, the national medical insurance administration, the State Food and Drug Administration and other nine departments jointly issued the “14th five year plan” for the development of pharmaceutical industry. The development goals include: steady growth in economies of scale, and an average annual growth rate of more than 8% in operating revenue and total profits; Innovation driven transformation has achieved remarkable results. The R & D investment of the whole industry has increased by more than 10% annually. By 2025, the proportion of new sales of innovative products in the increment of operating revenue of the whole industry will further increase; The industrial chain and supply chain are stable and controllable; The supply guarantee capacity has been continuously enhanced; System improvement of manufacturing level; International development has accelerated in an all-round way.
Core view
The pharmaceutical and biological industry index fell 6.83% in the current period, ranking 28th among Shenwan’s 31 primary industry indexes. The seven secondary sectors all outperformed the Shanghai Composite Index, CSI 300 and SME 100.
In terms of the epidemic situation, as of February 5, the local epidemic situation before the Chinese new year has been effectively controlled. However, the number of new overseas confirmed cases is still high, with 3 million new confirmed cases floating up and down in a single day. In terms of covid-19 vaccination, covid-19 vaccination has made steady progress. According to the data of China’s National Health Commission, China had received covid-19 virus vaccine for a total of 3.003 billion doses as of February 4. In the short to medium term, the global spread of the epidemic is still severe. Therefore, it is necessary to continue to pay attention to the investment opportunities of covid-19 prevention and control industry chain, including covid-19 oral drugs, vaccines and antibodies. At the same time, we can pay attention to the listed companies deeply involved in covid-19 prevention and control drug supply chain. According to the statistics since 2000, as of February 5, the overall valuation of the pharmaceutical and biological industry was in the lower quantile of historical valuation, and the PE quantile of the industry was 11.58%. In terms of sub sectors, the PE of chemical raw materials, chemical preparations, traditional Chinese medicine, biological products, pharmaceutical commerce, medical devices and medical services were 29.58, 32.30, 32.13, 27.23, 16.21, 22.12 and 55.83 respectively; The Pb quantile of pharmaceutical and biological industry is 47.63%, and the Pb of chemical raw materials, chemical preparations, traditional Chinese medicine, biological products, pharmaceutical commerce, medical devices and medical services are 2.90, 2.91, 2.92, 4.13, 1.56, 4.93 and 7.11 respectively. Judging from the current valuation of the pharmaceutical industry, after a substantial adjustment before the Spring Festival, the disposal position of the overall valuation of the pharmaceutical industry continues to decline.
According to the data before and after the Spring Festival since 2000, the rise and fall before the Spring Festival were different, and the pharmaceutical industry index fell nine times. Among them, the cumulative decline before the festival in 2016 was the largest, as high as 23.75%. Except for 2001, 2007, 2017 and 2021, the first week after the opening of the Spring Festival was mostly upward. In 2022, the pharmaceutical industry fell by 14.94% before the Spring Festival, ranking 30th in the industry, second only to 2016. Considering the historical market, valuation level and the growth expectation of the 14th five year plan, we are optimistic about the short-term recovery market after the festival. The national health reform conference was held in Beijing on February 27, 2021. On January 30, the Ministry of industry and information technology, the National Health Commission, the national medical insurance administration, the State Food and Drug Administration and other nine departments jointly issued the “14th five year plan” for the development of pharmaceutical industry. The plan defines the expected growth rate of more than 8% during the 14th Five Year Plan period of the pharmaceutical industry, and points out the prominent problems and directions restricting the development of the industry, including the lack of original innovation ability in frontier fields, the industrial ecology of coordinated development has not yet been formed, the supply risk of small-scale seed drugs still exists, and the quality control level of generic drugs, traditional Chinese medicine, auxiliary materials and packaging materials needs to be improved, The international competitive advantage of high value-added products is not strong. According to the development objectives proposed in the plan, we are optimistic about innovation driven enterprises, which have the driving ability in subdivided fields, face the urgent clinical needs such as children’s medicine and rare diseases, and have a global layout and a high proportion of international sales. From a policy perspective, under the environment of global specialization and division of labor and the background of the game between China and the United States, it is an inevitable trend for Chinese policies to promote the development of pharmaceutical innovation and its industrial chain. Under the influence of uncertain factors of overseas covid-19 epidemic, China’s industry leaders with global competitive comparative advantages and second-line blue chips with outstanding cost performance deserve continuous attention.
Based on the resonance of multiple factors such as the US interest rate increase and capital outflow, the rapid decline of the market before the Spring Festival has accumulated a certain margin of safety. With the confirmation of the end of economic policy and the arrival of a new round of stable growth cycle, we believe that the focus of market repair may focus on sectors with marginal improvement and valuation repair logic. At the time point when valuation switching is gradually approaching, the layout in advance needs to pay particular attention to the sustainability of marginal improvement and growth. From the perspective of valuation, the pharmaceutical industry is currently at a historical low valuation. At the same time, after the continuous correction in the early stage and the impact of centralized purchase policy news, the industry as a whole is in a bad out stage, and it is expected to get out of the repair market after the Festival. In the long run, with the continuous promotion of the procurement of drugs and consumables, enterprises with high safety margin, strong innovation ability, rich product pipelines and good competition pattern are expected to continue to benefit in the long cycle. It is suggested to continue to focus on the layout of innovative drug industry chain, high-end medical devices, medical services and medical consumption, and tap the second-line blue chips with relatively low valuation:
1) innovative drugs and innovative drug industry chain, including comprehensive and specialized innovative drug enterprises and CXO industry. It is suggested to pay attention to Jiangsu Hengrui Medicine Co.Ltd(600276) , Jiangsu Nhwa Pharmaceutical Co.Ltd(002262) , Asymchem Laboratories (Tianjin) Co.Ltd(002821) , Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) , Wuxi Apptec Co.Ltd(603259) , Hangzhou Tigermed Consulting Co.Ltd(300347) , Pharmaron Beijing Co.Ltd(300759) and Apeloa Pharmaceutical Co.Ltd(000739) ;
2) it is recommended to pay attention to Shenzhen Mindray Bio-Medical Electronics Co.Ltd(300760) and Lepu Medical Technology (Beijing) Co.Ltd(300003) for the leading high-end medical devices with outstanding import substitution ability;
3) for medical consumption terminals benefiting from the increased market concentration, it is recommended to pay attention to Yixintang Pharmaceutical Group Co.Ltd(002727) , Yifeng Pharmacy Chain Co.Ltd(603939) and Dian Diagnostics Group Co.Ltd(300244) ;
4) biological products enterprises with scarcity and consumption attributes, including Changchun High And New Technology Industries (Group) Inc(000661) , Hualan Biological Engineering Inc(002007) , Cansino Biologics Inc(688185) – U and Pacific Shuanglin Bio-Pharmacy Co.Ltd(000403) .
Risk tips: covid-19 epidemic fluctuation risk and market adjustment risk
