Market review:
Last week, the overall performance of A-Shares was strong. The Shanghai index rose 2.19%, the Shenzhen Component Index rose 1.29% and the gem index rose 1.10%. Shenwanyi sub real estate (+ 10.82%), building materials (+ 6.29%) and banks (+ 5.18%) led the rise; Electronics (- 3.10%), defense and military industry (- 2.28%) and nonferrous metals (- 1.97%) led the decline.
During the reporting period, the pharmaceutical and biological sector underperformed the CSI 300 index by 2.58% and the gem index by 1.25%. The sub sectors of the pharmaceutical industry were divided, among which the pharmaceutical service sector led the rise, up 1.60%; Biological products sector led the decline, down 2.88%.
Industry highlights of the week:
1. The general office of the State Council printed and distributed the development plan of traditional Chinese medicine in the 14th five year plan;
2. Shandong Medical Insurance Bureau issued the notice on doing a good job in the online procurement of traditional Chinese medicine formula granules;
Industry Week view:
Recently, there have been many favorable policies for the traditional Chinese medicine industry. Last week, the State Council issued the “14th five year plan” for the development of traditional Chinese medicine, which formulated an all-round strategic plan for the long-term development of the traditional Chinese medicine industry. At the same time, online procurement has been carried out in various provinces, which is conducive to industry norms. We believe that with the support of top-level design, the traditional Chinese medicine industry has long-term investment value, and we suggest paying attention to relevant racetracks. 1) OTC of traditional Chinese medicine: it has strong policy immunity, low risk of fee control and price reduction, sufficient power of enterprise layout outside the hospital market, and the future expansion of the industry can be expected; 2) Innovation of traditional Chinese medicine: it is one of the core competitiveness of traditional Chinese medicine enterprises to innovate in combination with modern advanced research means and layout R & D pipelines in advantageous fields. Policies will increase support for scientific and technological innovation of traditional Chinese medicine. Enterprises are expected to accelerate innovation transformation on the basis of inheritance; 3) Traditional Chinese medicine formula granules: demand expansion (terminal liberalization) + medical insurance access landing, driving industrial expansion; 4) Covid-19 treatment related traditional Chinese medicine track: the state recognizes the role of traditional Chinese medicine in the prevention and control of major infectious diseases, including covid-19 pneumonia, and brings some traditional Chinese medicine and medical services into the covid-19 pneumonia diagnosis and treatment plan, further improving the strategic position of traditional Chinese medicine; 5) Traditional Chinese medicine: the State supports the expansion of the total amount of high-quality traditional Chinese medicine medical resources, encourages social forces to run traditional Chinese medicine at the grass-roots level, and drives the expansion of the traditional Chinese medicine medical industry; 6) Chinese medicine going to sea: taking advantage of the “epidemic” to go to sea, promote Chinese medicine enterprises to explore international key markets, and usher in an opportunity for overseas registration and sales of Chinese medicine.
We recommend focusing on:
In the long run, under the background of medical insurance fee control and China Meheco Group Co.Ltd(600056) industrial upgrading, the pharmaceutical sector is dominated by structural investment opportunities. It is suggested to pay attention to: 1) the CXO sector is not affected by policies and has a high outlook. The current core problem is to kill the valuation, and there is no significant change in the fundamentals. 2) Policy immunization + undervalued value enables the OTC segment of traditional Chinese medicine to have performance growth momentum and valuation cost performance.
Risk factors: the risk that the implementation of policies such as cost control and volume procurement exceeds the expectation, and the risk that the implementation of policies does not meet the expectation.
