Investment logic
Driven by favorable policies for many years, the traditional Chinese medicine industry has ushered in new opportunities. In recent years, the state has successively issued relevant policies for the development of traditional Chinese medicine industry, incorporated traditional Chinese medicine into the national development plan, laid a solid foundation for the traditional Chinese medicine market, and further promoted the optimization of the traditional Chinese medicine market in terms of talent training, innovation and R & D, safety supervision and so on. Relevant policies have continuously promoted the coordinated development of Chinese and Western medicine, creating a better growth environment for the traditional Chinese medicine industry. Chinese patent medicine and other products are included in the scope of centralized purchase, which is expected to promote the admission of traditional Chinese medicine into the hospital and broaden the large-scale channels. In addition, the traditional Chinese medicine industry is highly dependent on upstream traditional Chinese medicine raw materials. With the stricter supervision of traditional Chinese medicine and the rise of its price, it will increase the cost pressure of traditional Chinese medicine enterprises. Due to its obvious advantages in the OTC category, the main sales channels of traditional Chinese medicine are concentrated in the retail end and self-supporting rather than, and only a few are included in the centralized purchase list. Driven by the market demand and the attention of pharmacies, traditional Chinese medicine has high price maintenance ability.
The aggravation of the aging process and the increase of the incidence of chronic diseases continue to promote the market expansion. The epidemic situation and policy support improve the consumer recognition of traditional Chinese medicine and gradually show its consumption attribute. With the aggravation of population aging, the number of patients with chronic diseases continues to expand, and the rigid demand for traditional Chinese medicine continues to grow. At the same time, residents’ consumption structure has been upgraded, their disposable income has been improved, their awareness of health management affected by the epidemic has been greatly improved, and residents’ demand for disease prevention and treatment has increased. Traditional Chinese medicine plays an important role in the fight against covid-19 epidemic. At the same time, the regulatory norms of traditional Chinese medicine industry are constantly strengthened, and there is a broad space for innovative development and consumption upgrading of traditional Chinese medicine.
OTC of brand traditional Chinese medicine is expected to usher in development opportunities. According to incomplete statistics, the revenue and net profit attributable to the parent company of listed enterprises in the traditional Chinese medicine industry included in our statistics increased by 11.2% and 20.7% year-on-year respectively in the first three quarters. Under the low base environment, the industry recovered significantly in the first three quarters of 2021. The trend of the subdivided track of the traditional Chinese medicine sector is differentiated, and the performance of some companies with brand traditional Chinese medicine, partial consumption and great health is relatively good.
Recommended subject matter
We are optimistic about the follow-up market expansion of traditional Chinese medicine and the continuous growth of relevant enterprises, focusing on brand traditional Chinese medicine, partial consumption and great health.
Key companies: Zhangzhou Pientzehuang Pharmaceutical Co.Ltd(600436) , Yunnan Baiyao Group Co.Ltd(000538) , Dong-E-E-Jiao Co.Ltd(000423) , Jianmin Pharmaceutical Group Co.Ltd(600976) , Beijing Tongrentang Co.Ltd(600085) , etc.
Risk statement
Repeated epidemic risk; High risk of channel inventory; The improvement of corporate governance is lower than the expected risk;
