The depth of index adjustment is in place, and the support at the bottom of medicine is sufficient. From the adjustment of this index, the Shenwan pharmaceutical index adjusted 395239 points, with an adjustment range of about 30%. Referring to the index adjustment depth in 2018, it was 382598 points, with an adjustment range of about 40%. Although the adjustment range is not as good as before due to the base number, the depth of the adjustment is basically the same as that in 2018, and the index has been adjusted to the lowest level in 2018. The valuation of Shenwan pharmaceutical industry is about 29.22 times, approaching the lowest level in a decade, and the bottom of the pharmaceutical index has sufficient support.
The congestion of positions is basically digested, and the value of long-term strategic investment is highlighted again. The proportion of pharmaceutical stocks held by public offering continued to decline, and the position was at a historical low in recent three years. At the beginning of 2022, although the pharmaceutical index fell unilaterally, the transaction volume increased significantly. We believe that this is the result of the gradual purchase of funds and the gradual emergence of strong support at the bottom of medicine. In addition, from Q4 in 2021, the number of holding funds of several front-line “leaders” has decreased significantly. After more than half a year of adjustment since 2021h1, the problem of “leader” transaction congestion has been effectively alleviated.
Emotional concerns fell one by one, and the cradle of blue chip stocks once again launched a wave of high growth performance. Looking back on the pharmaceutical industry in 2021, we believe that the concerns disturbing the pharmaceutical industry, such as consumption power, geopolitics, medical insurance payment and the internationalization path of innovative drugs, have been implemented and digested, the essence of long-term growth of medicine has not changed, and the value of blue chip stocks is expected to be valued again. At present, among the 104 companies in the A-share Shenwan pharmaceutical sector that have released performance express, 26 companies have a net profit growth rate of more than 50%, 18 have a growth rate of 30% – 50%, and 21 have a growth rate of 10% – 30%.
This week’s stock recommendations focus on the portfolio
Growth Portfolio: Pharmablock Sciences (Nanjing) Inc(300725) , Beijing Balance Medical Technology Co.Ltd(688198) , Eyebright Medical Technology(Beijing) Co.Ltd(688050)
Robust combination: and
Elastic combination: Suzhou Iron Technology Co.Ltd(688329) , Shandong Jincheng Pharmaceutical Group Co.Ltd(300233) , Pacific Shuanglin Bio-Pharmacy Co.Ltd(000403)
Investment suggestion: at the current time point, we are strategically optimistic about the pharmaceutical industry. Under the catalysis of good turns such as the index adjustment in place, the crowded digestion of positions, the return of valuation to high cost performance, the landing of emotional concerns and the performance wave of performance stocks, the bottom allocation opportunity of the pharmaceutical industry is coming. As for the investment direction, we think 1) welcome the new: first, pay attention to the new leader of the new track: “life science industry chain”, “cell gene therapy”, etc; 2) High prosperity: secondly, focus on the track with high scenery: “cdmo”, “pharmaceutical care CXO”, “high-end medical equipment”; 3) Cost performance: undervalued layout + fundamentals are expected to reverse the sector – “traditional Chinese medicine”, “API” and “blood products”.
Risk tip: the risk of intensified competition in centralized procurement, the risk that the financing of the pharmaceutical industry is less than expected, and the risk of intensified geopolitical impact.
