Core view
Pharmaceutical week view: the release of the US pharmaceutical supply chain report is optimistic about the CXO sector, and the release of the US pharmaceutical supply chain report eliminates the market’s concerns about CXO review. On February 24, the White House released a plan to revitalize the U.S. manufacturing industry and ensure key supply chains in 2022. On the same day, HHS issued the public health supply chain and industrial base one year report. The report is a review of executive order 14017 a year ago. For the supply chain of APIs and key materials, the report proposes that HHS will continue to identify and predict product shortages, alleviate or eliminate shortages by investing in support of local production, and does not mention the review of CXO and restrictions on overseas supply chains to eliminate market concerns.
CXO enterprises are still in a high outlook, with historically low valuations, and are firmly optimistic. We believe that pharmaceutical outsourcing service CXO is a rare high growth segment in the pharmaceutical industry. Thanks to the strong demand for drug R & D and the improvement of R & D and production outsourcing rate outside China, there is still much room for service penetration. According to the announced performance express and performance forecast for 2021, the net profit attributable to the parent company of most CXO companies has increased by more than 40%. From the current order situation, it can still continue to grow rapidly in 2022. At present, the valuation of CXO company is at a historical low. With the gradual elimination of overseas policy disturbances, the performance of CXO company is gradually realized, and the valuation is expected to be repaired. We mainly recommend cro: Wuxi Apptec Co.Ltd(603259) , Pharmaron Beijing Co.Ltd(300759) , Hangzhou Tigermed Consulting Co.Ltd(300347) , cdmo: Asymchem Laboratories (Tianjin) Co.Ltd(002821) , Porton Pharma Solutions Ltd(300363) .
Market review: the biomedical sector rose 1.71% last week, ranking sixth in weekly rise and decline. Since this year, the pharmaceutical and biological industry has fallen by 11.78%, 4.35 percentage points lower than the CSI 300 index, ranking 28th in all SW primary industries.
In terms of subdivided industries, the pharmaceutical and biological subdivided sectors rose more or less last week, and medical services rose the most, up 4.11%; Pharmaceutical business was the weakest, down 0.62%. Since the beginning of this year, the performance of chemical API and pharmaceutical business has been the best, down 5.78% and 9.90% respectively since the beginning of the year; Medical services was the weakest performing sub sector, down 15.17%. Medical services (- 15.17%) and biological products (- 12.31%) underperformed the pharmaceutical and biological (SW) industry index.
From the performance of individual stocks, the top five stocks that rose last week were: Nanjing Hicin Pharmaceutical Co.Ltd(300584) (72.46%), Lanzhou Foci Pharmaceutical Co.Ltd(002644) (38.15%), Honz Pharmaceutical Co.Ltd(300086) (35.35%), Zjamp Group Co.Ltd(002758) (31.09%) and Gansu Longshenrongfa Pharmaceutical Industry Co.Ltd(300534) (31.01%). The top five stocks with declines are: ST Haiyi (- 10.54%), Zhejiang Anglikang Pharmaceutical Co.Ltd(002940) (- 8.28%), Contec Medical Systems Co.Ltd(300869) (- 7.69%), Bio-Thera Solutions Ltd(688177) -u (- 6.30%) and St Guanfu (- 5.85%).
Valuation: the valuation showed a slight recovery. As of Friday (February 25), PE (TTM) and Pb (LF) of the whole pharmaceutical and biological (SW) industry were 31.44 times and 3.84 times respectively.
Risk warning: medical policy risk; Lower prices than expected; Systemic risk.