The overall OTC market of Chinese patent medicine continued to grow steadily. According to the data of Intranet, from 2013 to 2019, the sales CAGR of Chinese patent medicine in urban physical pharmacies reached 7.52%, showing a steady growth trend as a whole. In various treatment fields, the fields of common diseases and chronic diseases such as throat medicine, respiratory system medicine, skeletal muscle system medicine and gastrointestinal disease medicine are the advantageous treatment fields of Chinese patent medicine OTC, and its sales revenue exceeds that of chemical medicine.
Four positive factors drive the OTC investment value of Chinese patent medicine. (1) Policy support: since 2019, the state has successively promulgated a number of policies to support traditional Chinese medicine from three aspects: optimizing the evaluation methods of new traditional Chinese medicine, improving the service capacity of traditional Chinese medicine and strengthening the payment of medical insurance to traditional Chinese medicine. (2) Products have the right to raise prices: in 2015, the national development and Reform Commission cancelled the administrative control of drug prices, in fact forming the independent pricing model of OTC of Chinese patent medicines; With the increase in the price of Chinese herbal medicines in the upstream and the increase in the price acceptance of Chinese patent medicines in the downstream pharmacies, the OTC price increase channel of Chinese patent medicines has been smooth in recent years. (3) Market share improvement of head brand: with the improvement of consumer brand awareness + online channel share, the growth of head brand continues to exceed the industry average. (4) Weakening of channel inventory cycle: the establishment of drug traceability code system + self built purchase, sales and inventory monitoring system of large and medium-sized OTC enterprises, the impact of channel inventory cycle on enterprise performance is significantly weakened.
Valuable Chinese patent medicine OTC has strong ability to raise prices, fast sales growth and the most investment value Zhangzhou Pientzehuang Pharmaceutical Co.Ltd(600436) , Angong Niuhuang Pill and other precious Chinese patent medicines generally contain bezoar, musk and other scarce medicinal materials, and the product brand power is very strong. Its price increase range is high (generally 5% – 10% / year) and the volume is fast (the sales growth rate is about 15% – 20% / year). It has the most investment value in OTC products of Chinese patent medicines.
OTC of brand Chinese patent medicine has certain ability to raise prices and fast volume. Brand Chinese patent medicine OTC usually has strong brand premium power in a certain treatment field, and the product market share is high. Its price increase range is about 3% ~ 5% / year, and the sales growth rate is about 5% ~ 10% / year.
Industry rating: the traditional Chinese medicine industry is supported by national policies, the valuation level of the sector is low, and the main products have a certain right to raise prices, maintaining the “recommended” rating.
Investment advice: investment advice: investment advice: take into account the pricing power of the product, brand influence, channel control, corporate governance and other factors, and based on our judgment of the company’s long-term sustainability, and based on our judgment of the company’s long-term sustainability, we suggest investors focus on 0 China Baoan Group Co.Ltd(000009) 99\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\, Mayinglong Pharmaceutical Group Co.Ltd(600993) Chongqing Taiji Industry (Group) Co.Ltd(600129) , Guangyuyuan Chinese Herbal Medicine Co.Ltd(600771) etc.
Risk tip: the risk that the OTC price increase of Chinese patent medicine does not reach the expected range; The risk of losing control of channel inventory management; The risk of weakening the implementation of national support policies; The risk of more drugs entering the drugstore channel and intensifying the competition pattern under the background of volume procurement; Risks of corporate governance of some enterprises; Uncertainty risk of cross industry comparison; Focus on the risk that the company’s performance is lower than expected.
