Report guide
Since the beginning of 2022, due to the market’s concerns about the performance sustainability and capacity cycle in 2023, the underlying stock price of CXO has continued to adjust. We find that the average price earnings ratio of CXO is close to the lowest value of valuation in recent 10 years, and the annual position increase window period is open. At the same time, the window period of performance forecast disclosure began in late January. Referring to the base in 2020 and the incremental impact of covid-19 project, we believe that pharmaceutical CXO is still the sector with the fastest performance growth, the best fundamentals and policies, accelerated capacity improvement and performance exceeding expectations.
Key investment points
Thinking this week: from the perspective of 10-year valuation, grasp the annual position increase period of CXO
We found that CXO targets have been continuously adjusted since the beginning of 2022. The main concerns of the market are: ① the market is worried about the sustainability of the industry’s performance after 2023 after covid-19 orders; ② Through capacity cycle analysis, it is considered that the growth may slow down after 2023.
Compared with the market, we are more optimistic about the unexpected and sustainability of performance growth. We suggest to dilute the event impact of covid-19 and pay more attention to the improvement of the status of the industrial chain and the accelerated improvement of supply capacity.
From the perspective of valuation, we analyzed the average p / E ratio range and center of each sub sector of medicine in recent 10 years since 2011. We found that the relative valuation of Chinese herbal pieces has been close to the highest value of the average price earnings ratio (TTM, corresponding to the weekly closing price) in the past 10 years (50.05 times), reaching 48.17 times. The current average p / E ratio of medical services (including CXO) and medical devices has been close to the lowest valuation in recent 10 years. We believe that the pharmaceutical industry will gradually enter the window period of performance forecast disclosure in late January. Referring to the base in 2020 and the incremental impact of covid-19 project, we believe that pharmaceutical CXO is still the sector with the fastest performance growth, the best fundamentals and policies, accelerated capacity improvement and performance exceeding expectations, and the annual position increase window period is open.
Investment suggestion: it is recommended to recommend CXO targets with good fundamentals margin and continuous acceleration of capital expenditure from 2022 to 2023. Including Wuxi Apptec Co.Ltd(603259) , Zhejiang Jiuzhou Pharmaceutical Co.Ltd(603456) , Porton Pharma Solutions Ltd(300363) , Asymchem Laboratories (Tianjin) Co.Ltd(002821) , Fangda holdings, Joinn Laboratories (China) Co.Ltd(603127) , Shanghai Medicilon Inc(688202) , etc.
This week’s performance: the volume fell at the beginning of the year, focusing on the marginal good target in 22-23 years
This week, the pharmaceutical sector fell 4.55%, 2.17 percentage points lower than the Shanghai and Shenzhen 300 index, ranking sixth from bottom among all industries. In terms of trading volume, the turnover of the pharmaceutical industry this week was 575.57 billion yuan, accounting for 11.7% of the total turnover of all a shares, up 0.6pct month on month, 3.7pct higher than the central level in the past 18 years. As of January 7, 2022, the overall valuation of the pharmaceutical sector (historical TTM, overall method, excluding negative values) was 33 times, down 1.4pct month on month, which was significantly lower than the central level since 2011 (PE 38 times). The valuation premium rate of the pharmaceutical industry relative to the CSI 300 was 150.8%, down 5.9 PCT from the previous week, significantly lower than the central level in the past four years (182.3%).
According to the classification of wind CITIC medicine, the market performance of all fine molecular sectors of biomedicine was significantly differentiated this week, including pharmaceutical circulation (up 2.9% in the week), Chinese herbal pieces (up 2.1% in the week), medical services (down 8.4% in the week) and medical devices (down 6.7% in the week). Considering that the classification of CITIC pharmaceutical involves cross businesses of some companies, according to the classification of key companies of Zheshang pharmaceutical, traditional Chinese medicine rose significantly this week (up 1.9% this week) and pharmaceutical business (up 1.6% this week); The performance of scientific research services (down 8.4% in the week) and medical services (down 13.4% in the week) was weak.
Pharmaceutical investment strategy in 2022: grasp manufacturing and welcome innovation
We suggest that investors should break the “core assets” and “plate concept” in order to look at the investment opportunities in the upstream and manufacturing links with the industrial chain thinking, and the innovative medicine and equipment will continue to survive the fittest during the transition period. We believe that in 2022, medicine should adhere to the investment strategy of “grasping manufacturing and welcoming innovation”.
Specifically, it is recommended to focus on:
1) manufacturing sector: API, cdmo and other subdivided fields, and Nanjing King-Friend Biochemical Pharmaceutical Co.Ltd(603707) , Apeloa Pharmaceutical Co.Ltd(000739) , Wuxi Apptec Co.Ltd(603259) , Asymchem Laboratories (Tianjin) Co.Ltd(002821) , Zhejiang Jiuzhou Pharmaceutical Co.Ltd(603456) , Porton Pharma Solutions Ltd(300363) , Hainan Poly Pharm.Co.Ltd(300630) are recommended.
2) upstream: in the fields of pharmaceutical equipment, reagents and consumables, Sensong international, Tofflon Science And Technology Group Co.Ltd(300171) , Shanghai Titan Scientific Co.Ltd(688133) , Shanghai Aladdin Biochemical Technology Co.Ltd(688179) , Jenkem Technology Co.Ltd(688356) are recommended, and Qingdao Haier Biomedical Co.Ltd(688139) , Zhejiangtailin Bioengineering Co.Ltd(300813) , Truking Technology Limited(300358) , Iray Technology Company Limited(688301) , Qingdao Novelbeam Technology Co.Ltd(688677) are concerned.
3) innovation: for international equipment and drug companies, it is recommended to pay attention to Micro-Tech (Nanjing) Co.Ltd(688029) , minimally invasive medicine, Beijing Balance Medical Technology Co.Ltd(688198) , Baiji Shenzhou, Xinda biology, Shanghai Junshi Biosciences Co.Ltd(688180) , kangfang biology, etc.
4) others: consumer attribute, medical service, innovative supporting industry companies, recommend Hangzhou Tigermed Consulting Co.Ltd(300347) , Joinn Laboratories (China) Co.Ltd(603127) , pay attention to Chongqing Zhifei Biological Products Co.Ltd(300122) , Beijing Wantai Biological Pharmacy Enterprise Co.Ltd(603392) , Shenzhen Kangtai Biological Products Co.Ltd(300601) , Aier Eye Hospital Group Co.Ltd(300015) , Topchoice Medical Co.Inc(600763) , Hubei Jumpcan Pharmaceutical Co.Ltd(600566) , Zhangzhou Pientzehuang Pharmaceutical Co.Ltd(600436) , etc
Risk tips
Changes in industrial policies; The price of core products exceeded expectations; R & D progress is less than expected.
