Key investment points:
Current market review
In the current period (2.26 – 3.4), the Shanghai Composite Index closed at 344765, down 0.11%; The CSI 300 index closed at 449643, down 1.68%; SME 100 closed at 889735, down 3.52%; In the current period, Shenwan pharmaceutical and biological industry index closed at 1006260, up 0.18%, ranking 10th among Shenwan’s 31 primary industry indexes. Among the seven secondary sectors, the pharmaceutical business, chemical agents and API sectors outperformed the Shanghai Composite Index, CSI 300 and small and medium-sized 100.
Important information
15 departments jointly issued the 14th five year plan for healthy aging
On March 1, the National Health Commission and other 15 departments jointly issued the 14th five year plan for healthy aging. By 2025, the proportion of geriatrics departments set up in general hospitals at level II and above will be greater than or equal to 60%; The service rate of standardized health management in urban and rural communities for the elderly aged 65 and over reached more than 65%, and the health management rate of traditional Chinese medicine reached more than 75%.
Three departments print and distribute traditional Chinese medicine and implement “source” quality control
On March 2, the three departments of Anhui Province issued the notice on Further Strengthening the quality and safety supervision of traditional Chinese medicine and maintaining the market order of fair competition. Chinese herbal medicines are required to implement the source quality control of planting and breeding, and Chinese herbal medicine production enterprises are required to strengthen the management of purchasing and cutting Chinese herbal medicines while fresh.
2022 government work report: promote centralized volume procurement and strengthen
Drug guarantee for rare diseases
On March 5, the National People’s Congress officially opened in Beijing. The 2022 government work report put forward the goals in the field of medicine and health in 2022, including: strengthening the research and prevention of virus mutation, accelerating the research and development of vaccines and specific drugs, and continuously doing a good job in vaccination; The per capita financial subsidy standard for residents’ medical insurance and basic public health services will be increased by 30 yuan and 5 yuan respectively; Promote the centralized purchase of drugs and high-value medical consumables; Gradually improve the guarantee level of prevention and treatment services for cardiovascular and cerebrovascular diseases, cancer and other diseases; Strengthen the guarantee of drug use for rare diseases; Support the revitalization and development of traditional Chinese medicine; Promote the comprehensive reform of traditional Chinese medicine.
Core view
In the current period, Shenwan pharmaceutical and biological industry index closed at 1006260, up 0.18%, ranking 10th among Shenwan’s 31 primary industry indexes. Among the seven secondary sectors, the pharmaceutical business, chemical agents and API sectors outperformed the Shanghai Composite Index, CSI 300 and small and medium-sized 100.
In terms of the epidemic situation, the global epidemic continued to fall after the peak. At present, the number of new cases per day continues to drop to about 400000 from about 1.5 million last week. In terms of covid-19 vaccination, covid-19 vaccination has made steady progress. According to the data of China’s National Health Commission, China had received covid-19 virus vaccine for a total of 3.152 billion doses as of March 4.
In terms of news, on March 5, the National People’s Congress opened in Beijing, and Premier Li Keqiang made a government work report. In 2021, the per capita disposable income of residents will increase by 8.1% in real terms, the security of basic pension, basic medical care and social assistance will be strengthened, more outpatient expenses such as common diseases will be included in the scope of medical insurance reimbursement, and the inter provincial direct settlement rate of hospitalization expenses will reach 60%. In 2022, the tasks in the field of medicine and health include: continue to do a good job in the prevention and control of normalized epidemic situation, strengthen the research and prevention of virus mutation, accelerate the research and development of vaccines and specific drugs, and continue to do a good job in vaccination; The per capita financial subsidy standard for residents’ medical insurance and basic public health services will be increased by 30 yuan and 5 yuan respectively, so as to promote the provincial overall planning of basic medical insurance; Promote the centralized procurement of drugs and high-value medical consumables; Improve the direct settlement method for cross provincial and non local medical treatment, and realize the basic unification of the scope of medical insurance drugs throughout the country; Support the revitalization and development of traditional Chinese medicine and promote the comprehensive reform of traditional Chinese medicine. The 2022 government work report shows the continuity of national policy guidance in epidemic prevention and control, centralized procurement of drugs and high-value consumables, and traditional Chinese medicine. At the same time, the ability to pay for medical consumption has been enhanced by clearly improving residents’ medical insurance subsidy standards.
The rise of API prices and the expectation of price transmission to the downstream, combined with the API orders of covid-19 oral drugs of Pfizer and other companies, are the main factors leading the industry in the API sector this week, driving the sector to maintain a high outlook in the short term. Compared with the year-on-year situation of China’s CPI, PPI and chemical API PPI, the year-on-year trend of chemical API PPI is consistent with the PPI data in most cases, but there is a lag in time. Judging from the year-on-year situation of us CPI and China National Chemical Engineering Co.Ltd(601117) API PPI, they have an obvious resonance trend in the near future. The dual logic of domestic demand and export verifies the high boom expectation of API.. As of March 4, 2022, the API sector includes 34 listed companies (including senxuan medicine), with a total market value of 446237 billion yuan. According to the financial data, the revenue growth rate of API sector in 2020 was the lowest in recent years, with a year-on-year increase of 4.88%. The growth rate rebounded in the first three quarters of 2021, with 13.74%. Affected by the overall price rise of upstream materials of API, the performance of API sector is under pressure as a whole, and the sales gross profit margin, net profit margin and roe are lower than the same period in 2020. The growth rate of parent net profit in the first three quarters of 2021 is – 1.20%, with a significant year-on-year decline. With the expected fulfillment of cost transmission to downstream customers, there is an expectation of profitability reversal in the API sector. In terms of valuation, according to the data since 2000, as of March 4, the chemical API sector as a whole was in the low quantile of historical valuation, with PE of 32.06, 31.88% and Pb of 3.15, 43.04%. The short-term advantageous performance of the API industry has pushed up the valuation quantile, but it is still in a low to medium position as a whole. Considering the factors such as price change, cost transmission, performance and valuation, as well as the API order expectation brought by covid-19 oral medicine, we believe that the API sector may continue to be booming.
At the same time, affected by the demand of covid-19 oral drug supply chain, covid-19 industrial chain continues to maintain a high boom. In addition to the innovation expectations given by enterprises directly involved in covid-19 oral drug research and development, China’s CXO industrial chain has a complete integrated chain and obvious advantages in cost and efficiency. In the short term, it is suggested to continue to pay attention to the investment opportunities in the R & D of covid-19 small molecule drugs, and pay attention to the listed companies deeply involved in the supply chain of covid-19 preventive drugs, including cro and cdmo enterprises involved in covid-19 treatment. On the whole, we believe that the focus of market repair may continue to focus on sectors with marginal improvement and valuation repair logic. At the time point when valuation switching is gradually approaching, the advance layout needs to pay particular attention to the sustainability of marginal improvement and growth. From the perspective of valuation, the pharmaceutical industry is currently at a historical low valuation. The market has been worried that the suppression of the price segment by centralized purchase and medical insurance negotiation will change the growth attribute of the pharmaceutical industry. We believe that the logic of long-term stable growth of the pharmaceutical industry remains unchanged under the condition of demand determination and improvement of payment end capacity. In the long run, with the continuous promotion of the procurement of drugs and consumables, enterprises with high safety margin, strong innovation ability, rich product pipelines and good competition pattern are expected to continue to benefit in the long cycle. It is suggested to continue to focus on innovative drugs and innovative drug industry chain, high-end medical devices, medical consumption terminals and medical consumption layout with scarcity and consumption attributes, At the same time, tap the second-line blue chips with relatively low valuation:
1) innovative drugs and the industrial chain of innovative drugs and innovative drugs, including comprehensive and specialist innovative drug enterprises, CXO industry, and the industrial chain of innovative drugs and innovative drugs, including comprehensive and specialist innovative drug enterprises, and CXO industry. It is suggested to focus on Jiangsu Hengrui Medicine Co.Ltd(600276) \\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\\ etc;
2) it is recommended to pay attention to Shenzhen Mindray Bio-Medical Electronics Co.Ltd(300760) and Lepu Medical Technology (Beijing) Co.Ltd(300003) as the leader of high-end medical devices with outstanding import substitution ability;
3) for medical consumption terminals benefiting from increased market concentration, it is recommended to pay attention to Yixintang Pharmaceutical Group Co.Ltd(002727) , Yifeng Pharmacy Chain Co.Ltd(603939) and Dian Diagnostics Group Co.Ltd(300244) etc;
4) biological products enterprises with scarcity and consumption attributes, including Chongqing Zhifei Biological Products Co.Ltd(300122) , Changchun High And New Technology Industries (Group) Inc(000661) , Hualan Biological Engineering Inc(002007) , Cansino Biologics Inc(688185) -u and Pacific Shuanglin Bio-Pharmacy Co.Ltd(000403) .
Risk tips: covid-19 epidemic fluctuation risk and market adjustment risk
