On Competition: will industry competition intensify after the liberalization of policy?
The liberalization of the policy represents the cancellation of license barriers and the formal reduction of the threshold. In essence, on the one hand, the leading enterprises have obvious advantages in channels and varieties, and the moat is still there. On the other hand, the unification of national standards means that the quality management is more standardized. By participating in the formulation of industry standards, the leading enterprises are expected to shut out a considerable number of new entrants whose quality does not meet the standards, and constantly consolidate their first mover advantage and leading position.
About profit: the improvement of standards leads to the rise of costs. Is the profitability of relevant enterprises under pressure?
After the pilot, the existing national standard varieties need to meet the corresponding requirements, and the non national standard varieties need to meet the provincial standards of the place of use, resulting in an increase in costs. However, due to: 1) the current competitive pattern of traditional Chinese medicine formula granules industry is good, and the number of effective players is limited; 2) Except for the price limit in some provinces, the vast majority of regions adopt enterprise independent pricing, bidding or negotiation with hospitals. Therefore, we expect stock players to maintain a stable price system in order to maintain a good competitive pattern of enterprises, taking into account the acceptance of end patients and the improvement of product quality. It is expected that the price increase will cover the rising cost, and it is expected to obtain a higher gross profit level through moderate price increase.
About centralized purchase: how to view the time and decline of national centralized purchase of traditional Chinese medicine formula granules?
Time dimension: there are about 400 ~ 600 commonly used varieties of traditional Chinese medicine formula granules, and the standard formulation is progressing steadily, but from the current situation, only 196 varieties have been formed. We believe that: compared with generic drugs, consistency evaluation is the premise of centralized purchase of chemical drugs, and the formulation of the standard of traditional Chinese medicine formula particles is the prerequisite for centralized purchase; At the same time, in addition to limiting the quality standard, the cancellation of addition and the unification of equivalent are also the major prerequisites for the national centralized collection of traditional Chinese medicine formula granules. It can be seen from this that the current national centralized collection time of traditional Chinese medicine formula granules may not be fully mature, and we believe that there may still be a time window of more than two years.
Decline dimension: different from the relatively fixed production cost of chemical drugs, the upstream of traditional Chinese medicine formula particles corresponds to traditional Chinese medicine decoction pieces and traditional Chinese medicine planting industry. Due to the existence of uncontrollable factors such as climate and natural disasters, its production cost fluctuates greatly. The resource attribute of traditional Chinese medicine formula granules determines that its decline is expected to be more moderate than that of chemical drugs.
About space: how to view the industry scale and growth logic?
In terms of coverage depth: many enterprises are expected to join the bureau to jointly promote patient education. After getting rid of the "pilot" restrictions, the resistance faced by traditional Chinese medicine formula particles in market development is expected to be significantly reduced. National level policies support superposition of multiple players to carry out patient education simultaneously, which will jointly promote the improvement of the recognition of traditional Chinese medicine formula particles in the hearts of doctors and patients, and expand the application frequency, application population and application disease field of products.
In terms of coverage: the sales scope is broadened, from secondary and above TCM hospitals to medical institutions at all levels with TCM practice. According to China Statistical Yearbook (2019), there are 1.06 million health institutions (including hospitals), 1.02 million grass-roots medical and health institutions and 35000 hospitals in China. Among them, there are 20133 general hospitals, 9021 specialized hospitals and 4426 traditional Chinese medicine hospitals. It is estimated that the number of secondary and above traditional Chinese medicine hospitals is only about 2500. The use terminal of formula particles has been expanded from traditional Chinese medicine hospitals above level II to all medical institutions at all levels with traditional Chinese medicine practice. The scope of use has greatly increased and is expected to usher in several times of growth space.
Spatial estimation: the market of Chinese herbal medicine pieces is about ~2000 billion yuan, referring to the proportion of grains to Chinese herbal medicine, Japan ~80% and Taiwan ~70%. Assuming that the Chinese mainland formula granule has 35% substitution rate for Chinese herbal medicine and the price of Chinese herbal formula granule is 50% higher than that of Chinese herbal medicine, the Chinese medicine dispensing granule corresponds to the market space of about 105 billion yuan, which is several times higher than that of China's 200~300 billion yuan market in 2020.
Recommended purchases: Chinese traditional medicine (maintain the rating), China Resources Sanjiu Medical & Pharmaceutical Co.Ltd(000999) (maintain the rating); Recommended attention: Tianjin Chase Sun Pharmaceutical Co.Ltd(300026) .
（ Guosen Securities Co.Ltd(002736) ）
