Core view
In the traditional Chinese medicine industry, the traditional driving factors are not, but the brand strength is prominent
In terms of industry trend, with the encouragement of top-level design and policies, the traditional Chinese medicine market will still show a steady growth trend. However, in recent years, under the background that the traditional Chinese medicine industry has also been strengthened by policies and is about to enter national mining, the reshuffle of the traditional Chinese medicine industry has been irreversible. Facing the coming great changes in the industry, it is imperative for traditional Chinese medicine enterprises to accelerate their diversified transformation. In the transformation direction, the synergy effect of the transformation health field is the best and the effect is the fastest. The most direct benefit is that traditional Chinese medicine enterprises with strong brand build a large health industry through brand extension.
Three new changes determine the inflection point of brand traditional Chinese Medicine
New policy: covid-19 epidemic reshapes the cognition of traditional Chinese medicine, and inheriting and carrying forward traditional Chinese medicine has become the main theme. The implementation of a number of practical policies reflects the state’s direction for the development of traditional Chinese medicine, as well as inheritance and development. The adjustment of medical insurance catalogue and the implementation of traditional Chinese medicine granule policy in the second half of 2021 reflect the state’s attention to traditional Chinese medicine. Along this main line, we have reason to believe that more specific and substantive policies will be introduced in the future to promote the development of traditional Chinese medicine.
New channel: e-commerce leads directly to the C-end, and brands seize the minds of consumers. The rapid growth of pharmaceutical e-commerce during the epidemic in 2020 has increasingly become a force that can not be ignored. In the scenario that the Internet directly connects consumers, the superposition of three aspects makes the brand value more prominent from the perspective of manufacturers, platforms and consumers.
New category: one of the great characteristics of traditional drugs is the long R & D cycle and strict supervision, which is relatively unable to keep up with the changing consumption needs of consumers. Compared with traditional Chinese medicine, daily chemicals, food and other daily necessities have a shorter innovation cycle in terms of variety, packaging and specifications, which is more in line with contemporary consumers.
Short term catalysis: exclusive varieties give the foundation for price increase, and multiple equity incentives are carried out
There is no need to worry too much about the decline in the centralized purchase price of Chinese patent medicine. On the one hand, most of the Chinese patent medicines are exclusive varieties, so the market selection is more flexible. Patients in the retail market have the attribute of self payment, so their brand strength can give full play to their advantages and have a broader space. On the other hand, the cost of Chinese patent medicine is greatly affected by the price of raw materials, and the price of raw materials can often be transmitted to the consumer through terminal price increase. Taking Zhangzhou Pientzehuang Pharmaceutical Co.Ltd(600436) as an example, since Zhangzhou Pientzehuang Pharmaceutical Co.Ltd(600436) was listed on A-Shares in 2003, the company has announced price increases 17 times.
From the perspective of the company’s operation, we can also feel the company’s increased confidence in operation. In 2021 alone, 13 listed traditional Chinese medicine companies announced equity incentive plans, including many central enterprises of Huarun department. The growth rate in the future also basically falls behind, indicating that the company has indeed seen improvement in its actual operation. It is expected that in the future, with the addition of incentives, the operation of traditional Chinese medicine companies is expected to usher in an inflection point.
Investment suggestion: it is suggested to pay attention to the valuation repair caused by the bottom reversal of the performance of brand traditional Chinese medicine and the C-end logic confirmation
The traditional Chinese medicine sector is still an important part of the investment in the pharmaceutical industry. As of December 2021, according to Shenwan traditional Chinese medicine, the market value accounts for 15% of the overall pharmaceutical sector, including 71 listed companies. After years of adjustment, the valuation of the traditional Chinese medicine sector is also at the bottom. Most traditional Chinese medicine enterprises have been at a trough in the past three years, and the valuation has been lower than the overall PE of biomedicine for a long time. It is recommended to pay attention to the reversal of the bottom in the performance of traditional Chinese medicine companies with brand influence and the valuation repair brought by the C-end logic verification.
Relevant subject matter:
Time honored brands of traditional Chinese medicine: Zhangzhou Pientzehuang Pharmaceutical Co.Ltd(600436) , Yunnan Baiyao Group Co.Ltd(000538) , Beijing Tongrentang Co.Ltd(600085) , Guangyuyuan Chinese Herbal Medicine Co.Ltd(600771) etc;
High brand added value: China Resources Sanjiu Medical & Pharmaceutical Co.Ltd(000999) , Jianmin Pharmaceutical Group Co.Ltd(600976) , Jiuzhitang Co.Ltd(000989) , Henan Lingrui Pharmaceutical Co.Ltd(600285) etc;
Featured brands: Dong-E-E-Jiao Co.Ltd(000423) , Mayinglong Pharmaceutical Group Co.Ltd(600993) , Renhe Pharmacy Co.Ltd(000650) , Hubei Jumpcan Pharmaceutical Co.Ltd(600566) , Guizhou Sanli Pharmaceutical Co.Ltd(603439) , etc.
Risk warning: policy uncertainty, uncertainty of raw material supply fluctuation and uncertainty of market competition degree
