Recently, the traditional Chinese medicine sector with rising stock prices has attracted much attention from the capital market. The data show that under the background of the sharp correction of the pharmaceutical sector in the second half of 2021, the traditional Chinese medicine index (882572) rose nearly 30% against the trend in 2021, and the traditional Chinese medicine index rose 18% in the last two months of 2021 alone.
January 4 is the first day of the opening of the market in 2022, and the traditional Chinese medicine sector rose sharply on that day. Among them, Zhejiang Xinguang Pharmaceutical Co.Ltd(300519) (300519. SZ), Beijing Tongrentang Co.Ltd(600085) (600085. SH), Hunan Hansen Pharmaceutical Co.Ltd(002412) (002412. SZ) and other traditional Chinese medicine stocks rose one after another, and the heat of the traditional Chinese medicine sector did not decrease.
The sharp rise in the traditional Chinese medicine sector is affected by the continuous rise in the price of traditional Chinese medicine in the past two years, as well as the recent increase in the price of its products by relevant traditional Chinese medicine listed companies. Recently, the reporter of daily economic news visited one of the largest Chinese herbal medicine trading markets in China – Guangzhou Qingping Chinese herbal medicine market. Many stall owners told reporters that since the outbreak of the epidemic in 2020, the prices of most traditional Chinese medicine have been rising. At present, the rising market of traditional Chinese medicine has basically peaked. The interviewed Chinese herbal medicine analysts said that the rising market of Chinese herbal medicine should last until the first half of 2022.
In recent years, relevant departments have repeatedly issued policies to support the development of traditional Chinese medicine industry. On December 30, 2021, the State Medical Insurance Bureau and the State Administration of traditional Chinese medicine jointly issued the guiding opinions on medical insurance supporting the inheritance, innovation and development of traditional Chinese medicine, proposing to include qualified traditional Chinese medicine institutions in the designated medical insurance, and include appropriate traditional Chinese medicine and traditional Chinese medicine medical service items in the payment scope of medical insurance, which means the introduction of another favorable policy for traditional Chinese medicine.
Can the rising market of traditional Chinese medicine continue? Many brokerage research reports said that under the promotion of favorable policies for many years, the traditional Chinese medicine industry has ushered in new opportunities, the valuation and cost performance of traditional Chinese medicine enterprises are prominent, and they are optimistic about the follow-up market of traditional Chinese medicine. However, a number of private equity institutions and pharmaceutical industry researchers interviewed believe that the current round of rise in the traditional Chinese medicine sector is affected by the superposition of multiple factors such as valuation, policy and centralized procurement. The sustainability of the rising market is in doubt, and it is expected that the rising market will not last too long.
“the price soared like a rocket”
Guangzhou Qingping Chinese herbal medicine market is located on the Bank of the Pearl River in Liwan District, Guangzhou. It is one of the largest Chinese herbal medicine trading markets in China. On the afternoon of December 31, 2021, the reporter of daily economic news visited Qingping Chinese herbal medicine market. There are rows of stalls in the market, displaying all kinds of traditional Chinese medicine. The reporter saw that almost every stall boss is busy sorting out traditional Chinese medicine, and there are trucks to deliver and deliver goods from time to time. Photo of Qingping Chinese herbal medicine market in Guangzhou source: photographed by intern reporter Chen Hao
Near noon, not many consumers come to the market. A few consumers buy Chinese herbal medicines in stalls. A stall boss told reporters that the market is now mainly wholesale, customers mainly place orders online, and can send express directly after transfer on mobile phone. During the visit, the reporter often heard consumers mention words such as “too expensive” and “rising prices again”.
Li Ming (a pseudonym) is a native of Guangzhou. He is in his fifties. He is not tall. He has been engaged in the wholesale business of traditional Chinese medicine for more than 20 years. He is familiar with the functions and effects of traditional Chinese medicine. Pointing to the medicinal materials in his stall, he told reporters: “you can grind Salvia miltiorrhiza, Panax notoginseng, American ginseng and Dendrobium into powder, called Sibao powder, which can be used to flush and drink every day to reduce blood pressure.” From the street stall to the market building, he always guarded the wholesale of traditional Chinese medicine, and the traditional Chinese medicine stall of less than 20 square meters also carried the livelihood of his family.
Li Ming told reporters that this round of rising prices of traditional Chinese medicine began in early 2020. “After the covid-19 epidemic, the demand for health care has increased, and the demand for medicinal materials has also increased. Traditional Chinese medicine can improve immunity. Honeysuckle and isatis root will rise in 2020. Medicinal materials that can be used to moisten the lungs, such as lily, jade bamboo and sand ginseng, are selling well, and the price has also increased a lot.”
He also said that since 2021, the price of traditional Chinese medicine has generally risen. “For example, Rehmannia glutinosa was only more than ten yuan a kilogram last year (2020), and now it is more than thirty yuan a kilogram. The price of some traditional Chinese medicine has soared like a rocket.” When a reporter asked about the reasons for the rise, he said he didn’t know. “Maybe someone is hyping. It’s the same as frying stocks. The less the output of medicinal materials, the more people fry. Even onion and ginger are fried. Do you think there is no speculation about Chinese medicinal materials?”
According to Li Ming, the medicinal materials in his stall are mainly purchased from Yunnan and Guangxi. There are his old customers all over the country, either buying after eating or picking up after selling. He said that although the price of medicinal materials has risen a lot, he has not made more money. “We set prices according to the purchase price. When the terminal price of medicinal materials rises, the purchase price will also rise, and there will be fewer people to buy medicinal materials when the price rises.”
During the reporter’s visit, several stall bosses said they did not know the reasons for the rise of medicinal materials, nor when the rising market will end. A stall owner said that the price of traditional Chinese medicine has changed greatly. For example, Tianqi could sell for more than 300 yuan a catty when it was the most expensive five years ago. Then the price fell back in recent years, and now it is 180 yuan a catty. Tianqi with a current price of 180 yuan a catty source: photographed by intern reporter Chen Hao
Li Ming analyzed to reporters: “this round of rising market of medicinal materials has come to an end, and the price is basically stable. Now the price will only go up and down at the end of the year. We will see whether the price will fall after the end of the year.”
epidemic situation, production reduction…
the price of medicinal materials increased due to the superposition of multiple factors
According to the data of the traditional Chinese medicine information platform “yaotong.com”, the market index of traditional Chinese medicine has increased by more than 30% since 2020, compared with about 10% in the previous three years. In terms of various kinds of medicinal materials, the prices of more than 50 kinds of Chinese medicinal materials doubled in 2021, including white lentils, Rehmannia glutinosa and Eclipta chinensis, which increased by more than 800% and 300%.
Why has the price of traditional Chinese medicine increased significantly since 2020? Zheng Zhiwen, senior analyst of yaotong.com, said in an interview with the reporter of daily economic news that there are five main reasons for the rise in the price of traditional Chinese medicine:
First, after the outbreak of covid-19 epidemic in 2020, the prices of medicinal materials related to the epidemic began to rise, such as Radix Isatidis, honeysuckle and forsythia. According to the “New Coronavirus infection pneumonia diagnosis and treatment plan” issued by the relevant departments (Trial Seventh Edition), Huaxiang Zheng Qi capsule (pills, water, oral liquid), Lianhuaqingwen capsule (granule), Jinhua qinggan granule, Shu Feng Jiedu Capsule (granule) and other Chinese patent medicines are listed as the recommended treatment for COVID-19 pneumonia during the medical observation period.
Second, also affected by the epidemic, a large number of customs clearance ports were closed, and the cross-border logistics was greatly impacted. Some imported medicinal materials could not be transported to China. The prices of imported medicinal materials such as white cardamom, nux vomica and pepper began to rise.
Third, the price of traditional Chinese medicine is cyclical. The overproduction of traditional Chinese medicine stimulated by high prices in previous years has led to the low price of traditional Chinese medicine for many years around 2018. The continuous low price will lead to the reduction of species, and the price will start to rise again after the reduction of species. The price of traditional Chinese medicine shows a periodicity of “rising for three years, falling for three years and not rising for three years”.
Fourth, affected by frequent natural disasters and rising planting costs. In recent years, frequent natural disasters, such as low temperature, drought and flood, have led to a reduction in the production of some medicinal materials, resulting in a rise in prices; At the same time, in recent years, planting costs and harvesting costs are also rising, and the corresponding prices of medicinal materials will also rise.
Fifth, affected by the strengthening of quality supervision of traditional Chinese medicine. In July 2020, the new edition of the Pharmacopoeia of the people’s Republic of China was promulgated and officially implemented on December 30 of the same year. With the promulgation and implementation of the new pharmacopoeia, qualified medicinal materials have become the first choice for drug users. Due to the problems of heavy metals, agricultural residues, sulfur and ash, the price of qualified medicinal materials has increased, the price of unqualified medicinal materials has decreased, and the price of medicinal materials of different quality has also opened a distance. Chinese herbal medicines stacked at the stall of Qingping Chinese herbal medicine market in Guangzhou source: photographed by intern reporter Chen Hao
Does this round of rise have the impact of middlemen Hoarding? Zheng Zhiwen responded with a smile: “this must also happen. Because the price of medicinal materials is changing and has a profit-making effect, some funds will intervene in this industry and hoard some medicinal materials, which is also normal.”
How long will this rally last? Zheng Zhiwen analyzed and said: “it should last until the first half of 2022. The prices of medicinal materials whose prices rise in advance due to the epidemic have begun to decline. The early rise of medicinal materials will stimulate production. As soon as production resumes, the prices begin to decline. For some products with short production cycle, one-year-old and half year-old, the prices have recovered, or they can recover in 2022.”
listed companies of traditional Chinese medicine have raised the price of products
After the price rise of traditional Chinese medicine in the upper reaches of the industrial chain, raising the price of products has become one of the schemes for traditional Chinese medicine enterprises to deal with the rising cost. Recently, related Chinese medicine listed companies have raised the price of their proprietary Chinese medicine products.
Beijing Tongrentang Co.Ltd(600085) took the lead in raising the price of the company’s ace product Angong Niuhuang Pill. From December 1, 2021, Beijing Tongrentang Co.Ltd(600085) raised the price of Angong Niuhuang Pill from 780 yuan / box (3 g * pill / box)) to 860 yuan / box, with a price increase of about 10%. Beijing Tongrentang Co.Ltd(600085) more than 400 product specifications of Chinese patent medicines are produced throughout the year, represented by Angong Niuhuang Pill, Tongren Niuhuang Qingxin pill, Tongren Dahuoluo pill and other products. In the first half of 2021, the company achieved a revenue of RMB 7.359 billion, a year-on-year increase of 22.58%, and the net profit attributable to the parent company was RMB 624 million, a year-on-year increase of 29.91%. Among them, the company’s top five products achieved a revenue of 2.237 billion yuan, a year-on-year increase of 22.84%, and the operating cost increased by 25.75%.
On December 13, an investor asked whether Angong Niuhuang Pill with China Resources Sanjiu Medical & Pharmaceutical Co.Ltd(000999) (000999. SZ) would follow up the price increase. The company replied on the investor interaction platform that with the rise of the overall cost in recent years, especially the rising cost of raw materials and manpower, while taking into account the patient’s acceptance ability and the company’s cost pressure, the company will also adopt different pricing strategies for different products and different stages of the product cycle, The ex factory price of Angong Niuhuang Pill has increased this year. The reporter recently inquired about Ali health pharmacy that the price of Angong Niuhuang Pill of China Resources Sanjiu Medical & Pharmaceutical Co.Ltd(000999) is 399 yuan (3G * 1 pill / box).
The main raw materials of an Gong Niuhuang Pill are bezoar, musk, buffalo horn concentrated powder and so on. According to the data of yaotong.com, the price of bezoar (natural bile yellow) increased from 360000 yuan / kg in January 2019 to 550000 yuan / kg at present, and musk (NATURAL) increased from 360000 yuan / kg in January 2019 to 420000 yuan / kg at present.
According to the data of Intranet, Angong Niuhuang Pill is the largest variety of cardiovascular and cerebrovascular Chinese patent medicine in China’s urban physical pharmacies, and its sales have increased rapidly in recent years. After exceeding RMB 2 billion in 2019, it will increase by 16.52% year-on-year in 2020. It is expected to exceed RMB 3 billion in 2021. At present, more than 100 enterprises have the production approval of Angong Niuhuang Pill.
Huoxiang Zhengqi oral liquid is another Chinese patent medicine with increased price. On December 21, Chongqing Taiji Industry (Group) Co.Ltd(600129) (600129. SH) also replied on the investor interaction platform that the company’s drug Huoxiang Zhengqi oral liquid is the backbone of the company. Due to the continuous rise in the cost of main raw materials, auxiliary materials and energy, the company has recently adjusted the ex factory price of Huoxiang Zhengqi oral liquid in order to alleviate the rising pressure of the company’s cost and promote the sustainable development of the market, The average increase was 12%.
When asked whether there is a price increase plan for its products, Jiuzhitang Co.Ltd(000989) (000989. SZ) also said in the recent record of investor relations activities that the prices of traditional Chinese medicine raw materials have generally increased due to the influence of climate, planting area and other factors, especially the scarcity of precious raw materials and the contradiction between supply and demand; The company has been monitoring the price fluctuation of traditional Chinese medicine raw materials, predicting the price trend, and formulating corresponding procurement strategies to deal with the risk of price fluctuation.
According to Zheng Zhiwen’s analysis, under the background of the continuous rise in the price of traditional Chinese medicine, the raw material cost of traditional Chinese medicine enterprises also rises, and relevant enterprises will raise the price of their products to deal with it.
can the rising market of traditional Chinese medicine be maintained?
Since the State Council issued the outline of the strategic planning for the development of traditional Chinese medicine (2016-2030) in 2016, relevant departments have issued policies to support the development of the traditional Chinese medicine industry for many times. On December 30, 2021, the state medical insurance administration and the State Administration of traditional Chinese medicine jointly issued the guiding opinions on medical insurance supporting the inheritance, innovation and development of traditional Chinese medicine (hereinafter referred to as the opinions). The opinions proposed that we should fully understand the significance of medical insurance supporting the inheritance, innovation and development of traditional Chinese medicine, include qualified traditional Chinese medicine institutions into the designated medical insurance, and include appropriate traditional Chinese medicine and traditional Chinese medicine medical service items into the payment scope of medical insurance.
Zhuang Hongdong, chairman and fund manager of cheese fund, believes that the opinions gives greater policy preference to the reform of fixed-point access to medical insurance, medical service prices and payment methods, and strategically defines the importance of inheritance, innovation and development of traditional Chinese medicine; The applicability involved in the opinions is mainly hospital scenes. By fully mobilizing the functions of medical insurance and further improving the medical insurance support policies of traditional Chinese medicine, it will help to fully release the vitality of the development of traditional Chinese medicine. He also said that traditional Chinese medicine varieties and traditional Chinese medicine service enterprises with good competition pattern are expected to benefit.
Under the background of the sharp correction of the pharmaceutical sector in the second half of 2021, the market performance of the traditional Chinese medicine sector is outstanding. According to the data, the index of traditional Chinese medicine increased by nearly 30% in 2021, while the index of traditional Chinese medicine increased by 18% in the last two months of 2021. In addition, a number of listed companies of traditional Chinese medicine have also walked out of a wave of rising market.
On January 4, the first day of the opening of the market in 2022, the traditional Chinese medicine sector rose again, Zhejiang Xinguang Pharmaceutical Co.Ltd(300519) , Beijing Tongrentang Co.Ltd(600085) , Hunan Hansen Pharmaceutical Co.Ltd(002412) and other traditional Chinese medicine stocks rose one after another, and the traditional Chinese medicine sector continued its upward trend,
Why is the Chinese medicine sector out of a hot market? Huang Yiyun, medical research director of Fanglue Asset Management Co., Ltd., said in an interview with the reporter of daily economic news that the superposition of three factors led to this round of rise in the traditional Chinese medicine sector: the State encourages the development of the traditional Chinese medicine industry and relevant favorable policies are constantly issued; Many traditional Chinese medicine enterprises have not entered the centralized purchase of products and can set their own prices; Compared with the price earnings ratio of Listed Companies in the segments of innovative drugs and CXO, the price earnings ratio of traditional Chinese medicine sector has maintained a price earnings ratio of 20 to 30 times for a long time, and the valuation is relatively low.
Lin cunze, chairman of Shenzhen Senrui Investment Management Co., Ltd., said that the traditional Chinese medicine sector has several unique advantages: first, the share prices of many companies have fallen for five or six years before, and the valuation is very low; Second, most varieties of traditional Chinese medicine do not have the policy pressure of national centralized collection; Third, some traditional Chinese medicine brands, because of the rise of raw materials (musk, bezoar, etc.) and the continuous increase of product prices, stimulate the market’s expectation of future profits of enterprises; Fourth, the application scenarios of some formula particles are widened. All grass-roots hospitals can prescribe and retain the bonus, with good enthusiasm.
In addition, a number of securities companies are optimistic about the follow-up market of traditional Chinese medicine. According to Sinolink Securities Co.Ltd(600109) a research report, 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, the consumption structure and disposable income of residents have been upgraded, the awareness of health management affected by the epidemic has been greatly improved, and the residents’ demand for disease prevention and treatment has increased. Traditional Chinese medicine plays an important role in the process of combating covid-19 epidemic. At the same time, the regulatory norms of traditional Chinese medicine industry have been continuously strengthened, and there is a broad space for innovative development and consumption upgrading of traditional Chinese medicine.
How long can this round of Chinese medicine market last? Lin Cun said that generally speaking, the direction of medical innovation is not in traditional Chinese medicine. Over the years, traditional Chinese medicine has been poor and difficult to innovate. Only consumption upgrading and price increase; It is expected that the market of traditional Chinese medicine will not be particularly lasting. At present, it is more rebounding, but it is more policy safe than other pharmaceutical sectors.
Huang Yiyun said: “the sustainability of this round of market in the traditional Chinese medicine sector needs to be observed. I don’t think it has much sustainability. From the perspective of valuation, after this round of rise, the valuation of many enterprises has reached a relatively high position in recent three years.” He also said that the overall rise of all companies in the traditional Chinese medicine sector will be less and less, and there will be structural differentiation. The share prices of some companies may continue to grow with the help of the policy east wind, but the overall rise of the traditional Chinese medicine sector in 2022 is difficult to continue.
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(Daily Economic News)
