Event: the Bureau of industry and security (BIS) of the U.S. Department of Commerce included Yaoming biology in the latest online updated unverified list (UVL), which triggered a sharp fluctuation in the stock price of CXO sector and the emergency suspension of YaoMing biology.
Brief comment:
The UVL list has small restrictions, and it is not difficult to move out of the list. The UVL list is different from the entity list and the military end-user list. The entity will be included in the list only when the U.S. Department of commerce is unable to confirm the final legal application of export controlled goods. Yaoming biology is mainly due to the failure of the U.S. Department of Commerce to conduct on-site inspection for two years during the epidemic.
The UVL list only restricts the import of controlled goods from the United States and does not affect other business activities of the enterprise. As long as the enterprise provides reliable written materials and commitments or successfully accepts on-site inspection, it is expected to be removed from the list.
After 37 Chinese enterprises entered the UVL list of the United States in 2019, 8 were removed from the list in only two months.
The UVL list has almost no substantial impact on the drug Ming organisms. Entering the UVL list is only limited to the purchase of reaction tank hardware and a few filter products for Yaoming biological. Only the Shanghai and Wuxi factories of YaoMing biological have been listed this time. These two factories have been completed, and there is basically no purchase demand for corresponding products in the future. Moreover, the company also has corresponding suppliers in Europe, and the supply chain system in China is gradually improving, Therefore, the subsequent operation will not be affected.
At the same time, the company is also actively communicating with the U.S. Department of Commerce to fully cooperate with the investigation and is expected to be removed from the list.
Investment suggestions:
CXO sector: this event is only the implementation of normal procedures by the Ministry of Commerce, which has no impact on other CXO enterprises. There is no need to decompose and read. The fundamentals of CXO sector are still solid, and the current location has a high cost performance. Chinese CXO enterprises have long passed the era of simple processing and manufacturing and have global core competitiveness. Therefore, European and American pharmaceutical enterprises are inseparable from China's low-cost and efficient CXO production capacity, and the global production capacity demand will continue to transfer to China. Recommendations focus on:
Upstream of pharmaceutical industry chains such as Wuxi Apptec Co.Ltd(603259) , Yaoming biology, Asymchem Laboratories (Tianjin) Co.Ltd(002821) , Porton Pharma Solutions Ltd(300363) , Pharmaron Beijing Co.Ltd(300759) : from the perspective of supply chain, cytiva & pall, sedolis, semefield and German Merck are still the main suppliers, and Chinese enterprises such as Tofflon Science And Technology Group Co.Ltd(300171) , Truking Technology Limited(300358) , senson International, doning biology, Suzhou Nanomicro Technology Co.Ltd(688690) , cobest and aupmay have made breakthroughs in different fields of equipment and consumables. In extreme cases, Chinese enterprises basically have the ability of complete supply. The technology of domestic enterprises is constantly improving, the product capacity is gradually enhanced, the supply chain tension under covid-19 epidemic and the supply chain security of Chinese enterprises, the import substitution process of domestic enterprises is expected to accelerate. It is suggested to focus on Tofflon Science And Technology Group Co.Ltd(300171) , Truking Technology Limited(300358) , Sensong international, Suzhou Nanomicro Technology Co.Ltd(688690) , etc.
Risk tip: the orders are not as expected, the implementation of capacity planning is not as expected, and the industry policy risk
