Key investment points
Market review: this week, the pharmaceutical and biological index rose 4.85%, outperforming the Shanghai and Shenzhen 300 index by 3.8 percentage points, and the rise and fall of the industry ranked third. Since the beginning of 2022, the pharmaceutical industry has fallen by 13.25%, underperforming the CSI 300 index by 7.93%, ranking 28th in terms of rise and fall. This week, the valuation level (pe-ttm) of the pharmaceutical industry was 28.76 times, with a premium rate of 83% (5.2pp) relative to all a shares, 38% (3.6pp) relative to all A-Shares excluding banks, and 125% (7.9pp) relative to CSI 300. In terms of pharmaceutical sub industry, 11 sub industry sectors rose this week, and medical R & D outsourcing was the sub industry with the largest increase, up about 16.6%. The sub industries of medical equipment and hospital ranked the second and third with an increase of about 5.7% and 4.8% respectively. The sub industry with the smallest decline since the beginning of the year is in vitro diagnosis, down about – 6.4%.
The pharmaceutical industry rebounded significantly and continued to be optimistic about the traditional Chinese medicine consumer goods sector. The pharmaceutical sector rebounded significantly this week, mainly due to the following two reasons: 1) the current valuation of the pharmaceutical sector is 29 times, which has been gradually digested below the historical center, and the configuration cost performance is prominent. 2) The CXO sector was greatly affected by the UVL event in the early stage. At present, according to the published performance forecast for 2021, the prosperity of the sector is still in progress, and this week, it rebounded more catalyzed by events such as Porton Pharma Solutions Ltd(300363) newly signed cdmo order of Pfizer small molecule oral medicine, Hangzhou Tigermed Consulting Co.Ltd(300347) stock repurchase plan and so on. Current time point: we continue to be optimistic about three investment opportunities: the price rise of upstream materials in the traditional Chinese medicine sector drives the price rise of end products, the accelerated inventory turnover in the downstream, which is expected to usher in the replenishment cycle, and the improvement of the governance structure of relevant state-owned enterprises. It is recommended that investors focus on: 1) the Chinese medicine consumer goods sector with the attribute of medical insurance immunity; 2) Independent and controllable directions of pharmaceutical industry chain, such as equipment field; 3) Undervalued varieties with upward business trend;
In the long run, the pressure of medical insurance will become the norm in the future. On the one hand, we believe that leading pharmaceutical enterprises such as Jiangsu Hengrui Medicine Co.Ltd(600276) , Shenzhen Mindray Bio-Medical Electronics Co.Ltd(300760) are expected to cross the “medical insurance border” through “continuous innovation + internationalization”; On the other hand, medical insurance immunization is still a better choice. For the downstream TOC end, focus on the varieties that do not account for medical insurance, such as self funded biological drugs, traditional Chinese medicine consumer goods, medical beauty upstream products, etc; The tob end of the upstream of the industrial chain is relatively immune to policies, such as the CXO sector of the innovation Shenzhen New Industries Biomedical Engineering Co.Ltd(300832) chain. The equipment sector includes pharmaceutical machinery equipment, pharmacy automation equipment, consumables production equipment, etc., and the field of life science reagent consumables.
In the post epidemic era, we believe that we should focus on the field of “desensitization” of the epidemic. 1) Vaccine varieties not interfered by covid-19 or vaccine oversold varieties; 2) When peg is less than 1, the undervalued value or low expected variety with upward long-term fundamental trend; 3) The varieties of medical services that were damaged by the previous epidemic and recovered in demand in the future. In addition, with the gradual mitigation and normalization of the epidemic prevention and control measures, the demand for relevant substances that previously benefited from the epidemic (such as gloves, masks, covid-19 detection reagent, covid-19 vaccine, etc.) has fallen, and the performance still needs some time to digest and observe. There are still key directions in these fields in the next 2-3 years.
This week’s elastic combination: Shanghai Runda Medical Technology Co.Ltd(603108) (603108), Chongqing Taiji Industry (Group) Co.Ltd(600129) (600129), Tianjin Zhongxin Pharmaceutical Group Corporation Limited(600329) (600329), Zhejiang Shouxiangu Pharmaceutical Co.Ltd(603896) (603896), Truking Technology Limited(300358) (300358), Haisco Pharmaceutical Group Co.Ltd(002653) (002653).
This week’s robust portfolio: Jiangsu Hengrui Medicine Co.Ltd(600276) (600276), Shenzhen Mindray Bio-Medical Electronics Co.Ltd(300760) (300760), Baiji Shenzhou (688235), Zhangzhou Pientzehuang Pharmaceutical Co.Ltd(600436) (600436), China Resources Sanjiu Medical & Pharmaceutical Co.Ltd(000999) (000999), Topchoice Medical Co.Inc(600763) (600763).
Risk warning: drug price reduction risk; The implementation progress of medical reform policy is lower than the expected risk; Risk of R & D failure.
