Ping An View:
After long-term adjustment, the current valuation of traditional Chinese medicine is cost-effective. In the context of medical insurance fee control, the auxiliary drug varieties represented by traditional Chinese medicine injections were suppressed, resulting in a long-term correction in the overall performance and valuation of the traditional Chinese medicine sector. Since the beginning of 2016, Shenwan traditional Chinese medicine sector has increased by – 10%, only higher than – 25% of pharmaceutical business, while medical services, APIs and biological products have increased by 150%, 86% and 72% respectively; On December 20, 2021, the overall P / E ratio of traditional Chinese medicine sector was 31 times (TTM overall method), which was only higher than that of pharmaceutical commerce and medical devices, while that of medical services and chemical raw materials was as high as 67 times and 44 times. According to statistics, the valuation of traditional Chinese medicine enterprises with stable Fundamentals (positive growth in performance in recent three years) was basically between 15-30 times, and the valuation cost performance of some high-quality enterprises was outstanding.
The number of innovative traditional Chinese medicine approved reached a new high, which belongs to the direction of policy support. In September 2020, the registration classification and application data requirements of traditional Chinese medicine newly issued by the State Food and Drug Administration defined the registration classification standards of traditional Chinese medicine, and divided traditional Chinese medicine into four categories: innovative traditional Chinese medicine, improved traditional Chinese medicine, ancient classic famous prescription compound and the same prescription with the same name. According to incomplete statistics, since 2021, the number of innovative traditional Chinese medicines approved has reached 11, a new high in recent five years. After the outbreak of covid-19 pneumonia, traditional Chinese medicine fully participated in the epidemic prevention, control and treatment, and made important contributions. At the same time, the heavy support policies of the traditional Chinese medicine sector continue, which belong to the direction of policy support, such as several policies and measures on accelerating the characteristic development of traditional Chinese Medicine issued by the State Council in February 2021, and the opinions on Further Strengthening the work of traditional Chinese medicine in general hospitals and promoting the coordinated development of traditional Chinese and Western Medicine issued by the National Health Commission on June 30, On July 7, the five departments jointly formulated the implementation plan for the dissemination of traditional Chinese medicine culture (2021-2025), etc.
The internal circulation of traditional Chinese medicine is dominated, and the consumption attribute of some traditional Chinese medicine varieties is obvious. The traditional Chinese medicine sector has obvious internal circulation characteristics in terms of drug planting, drug production and terminal consumption, and is not affected by external policies towards China. OTC varieties of traditional Chinese medicine are similar to food and beverage products and have obvious consumption attributes. First, it focuses on the off-site market, does not occupy medical insurance, and is less affected by centralized mining; Second, the enterprise has certain independent pricing power and has the expectation of price increase. On December 20, 2021, the P / E ratio of Shenwan food processing sector was 40 times. Compared with that, there was still room for improvement in the valuation of OTC sector of traditional Chinese medicine.
It is suggested to pay active attention to the traditional Chinese medicine sector and stock selection ideas: 1) the target with stable fundamentals, sufficient adjustment and high valuation cost performance; 2) Mainly OTC varieties, low proportion of traditional Chinese medicine injections and strong R & D ability of new traditional Chinese medicine; 3) The consumption attribute is strong, and the core products should have the expectation of price increase. Based on the above analysis, it is recommended to pay attention to Henan Lingrui Pharmaceutical Co.Ltd(600285) , Kpc Pharmaceuticals Inc(600422) , Jianmin Pharmaceutical Group Co.Ltd(600976) , Mayinglong Pharmaceutical Group Co.Ltd(600993) , Hubei Jumpcan Pharmaceutical Co.Ltd(600566) , Beijing Tongrentang Co.Ltd(600085) , Guangyuyuan Chinese Herbal Medicine Co.Ltd(600771) , China Resources Sanjiu Medical & Pharmaceutical Co.Ltd(000999) , Shijiazhuang Yiling Pharmaceutical Co.Ltd(002603) , Hainan Huluwa Pharmaceutical Group Co.Ltd(605199) , etc.
Risk tips: 1) the implementation progress of traditional Chinese medicine support policy is lower than expected; 2) The price increase range or landing situation of some products is less than expected; 3) Covid-19 epidemic affected the terminal sales of OTC varieties of traditional Chinese medicine.
