In 2021, the pharmaceutical industry recovered strongly as a whole, and the growth of biomedicine and medical devices was the highest
In 2021, the total net profit attributable to the parent company after deducting non profits in the biomedical industry was 170876 billion yuan, with a year-on-year increase of 35.2% (excluding Kangmei Pharmaceutical Co.Ltd(600518) ). In 2022q1, the total net profit attributable to the parent company after deducting non profits in the biomedical industry was 74.018 billion yuan, a year-on-year increase of 54.56%; The strong growth is mainly driven by three aspects: 1) covid-19 vaccine; 2) Covid-19 detection; 3) Covid-19 related vaccine drug research and development and commercialization drive CXO business to maintain high growth.
From the perspective of molecular industries, the growth of epidemic related sectors was high in 2021, and the net profit of biological medicine and medical services (including CXO and third-party testing) after deduction was + 132.1% and + 35.0% year-on-year respectively; Except for chemical raw materials (- 7.3%) and pharmaceutical circulation (- 2.7%), other sectors have achieved growth recovery in varying degrees on the basis of last year’s low base, benefiting from the recovery of terminal demand and other factors. Among them, the net profit of Chinese patent medicine, medical devices and chemical agents deducting non attributable parent increased by 19.55%, 18.89% and 12.99% respectively on the same basis, and the growth rate excluding constituent stocks Kangmei Pharmaceutical Co.Ltd(600518) was 0% for decoction pieces of traditional Chinese medicine.
The sectors related to the 2022q1 epidemic achieved high growth again. The net profit of medical devices, biomedicine and medical services after deducting non attributable parent increased by 65.9%, 62.5% and 29.9% respectively year-on-year, and the net profit of traditional Chinese medicine decoction pieces increased by 15.6% (excluding Kangmei Pharmaceutical Co.Ltd(600518) ) and chemical raw materials (+ 11.66%). The performance of the other sectors declined due to centralized procurement, epidemic distribution and other factors. Among them, the net profit of chemical agents, pharmaceutical circulation and proprietary Chinese medicine after deducting non attributable parent decreased by 13.0% year-on-year 4.0% and 3.0%.
The policy suppresses the market of the sector, and the current sector configuration has high cost performance.
Since the beginning of 2021 (as of April 30, 2022), the CITIC pharmaceutical index has fallen by 27.55%, 3.8 percentage points lower than the CSI 300 index, and ranks lower in 30 CITIC primary industries. The absolute valuation and premium rate of the pharmaceutical sector are at a historical low in recent ten years. As of April 30, 2022, the PE of CITIC Pharmaceutical (TTM, overall method, excluding negative value) was 25X, reaching the historical 2.22% quantile, at the bottom of history. The proportion of heavy positions of 22q1 public funds was 12.34%, a year-on-year decrease of 0.71pct.
The investment of northward capital in the pharmaceutical industry declined. As of April 30, 2022, the total capital of northward capital in the pharmaceutical industry was 178 billion yuan, and the pharmaceutical position proportion of northward capital was 1.01%, which was 12.18% lower than that of public offering in the same period.
Summary of semi annual report of each section:
1. Chemical agents: the recovery of diagnosis and treatment volume drives the recovery of performance, and the centralized mining policy is still under pressure. In 2021, the epidemic situation in China was relatively stable, the volume of diagnosis and treatment in medical institutions recovered, and the growth rate increased under the 20-year low base. 2022q1 faces the dual pressure of centralized purchase price reduction and increasing R & D investment, and the growth rate of Jiangsu Hengrui Medicine Co.Ltd(600276) and other enterprises has also decreased.
In 2021, the average year-on-year growth rates of operating revenue, net profit attributable to parent company after deduction and operating cash flow of key companies were 10%, 22% (excluding Shenzhen Salubris Pharmaceuticals Co.Ltd(002294) ) and – 5% respectively; In 2022, the average year-on-year growth rates of Q1 operating income, net profit attributable to parent company after deduction and operating cash flow were 6%, 9% and – 50% respectively.
2. Biological drugs: the average year-on-year growth rates of operating revenue, net profit attributable to parent company after deduction and operating cash flow of key companies in 2021 were 31%, 44% and 92% respectively. 1) In the vaccine sector, covid-19 vaccines such as Chongqing Zhifei Biological Products Co.Ltd(300122) , Shenzhen Kangtai Biological Products Co.Ltd(300601) , Cansino Biologics Inc(688185) etc. have made huge profits on the market, and some self funded vaccines such as HPV vaccine are still in the stage of rapid mass production; 2) The new patients in the category of consumer biological drugs recovered well.
In 2022, the average year-on-year growth rates of operating revenue, net profit attributable to parent company after deduction and operating cash flow of Q1 key companies were 41%, 184% and – 128% respectively. Covid-19 vaccine contributed to the revenue, and the volume of core varieties such as HPV vaccine; Class consumer Biopharmaceutical Enterprises performed well in the expansion of new patients, and the outlook of Q1 continued to recover.
3. Life science services: the localization substitution process continues, and the scale effect is displayed rapidly. The average year-on-year growth rates of operating revenue, net profit attributable to parent company after deduction and operating cash flow of key companies in 2021 were 45%, 42% and – 2% respectively. They still achieved rapid growth in the high base, and there were abundant orders for conventional business, showing an accelerated growth trend. In 2022, the average year-on-year growth rates of Q1 operating revenue, net profit attributable to parent company after deduction and operating cash flow were 37%, 27% and – 134% respectively. Due to the impact of regional epidemics in Shanghai, the growth rate of routine product delivery of some enterprises slowed down slightly, and the overall industry can still maintain rapid growth.
4. Medical services: the average year-on-year growth rates of operating income, net profit after deduction and operating cash flow of key companies in 2021 were 24%, 8% (the growth rate of gushengtang was – 265%, and the average growth rate after elimination was 62%) and 40%, respectively. The overall strong growth was achieved, mainly due to the low base effect of the epidemic in 2020. In 2022, the average year-on-year growth rates of Q1 operating revenue, net profit attributable to parent company after deduction and operating cash flow were 8%, 8% and 10% respectively. The slowdown was mainly due to the repeated impact of the epidemic on passenger flow in the first quarter.
5. Medical devices: Based on the analysis of the key companies in the medical device sector we selected, the average year-on-year growth rates of operating revenue, net profit after deduction and operating cash flow in 2021 were 33%, 65% and 19% respectively, mainly because the epidemic situation in most regions was controlled, the diagnosis and treatment activities of medical institutions resumed rhythmically, and the relevant procurement gradually warmed up. In terms of splitting, the average year-on-year growth rates of operating income, net profit after deduction and operating cash flow of in vitro diagnosis were 42%, 98% and 30% respectively, which was higher than the average level, mainly because the normalization of covid-19 detection still led to a large market demand for covid-19 detection reagent.
In the first quarter of 2022, the average year-on-year growth rates of operating revenue, net profit after deduction and operating cash flow of key companies were 41%, 60% and 238% respectively. Among them, the average value of in vitro diagnosis is still higher than the overall level. We expect that it is mainly related to the recurrence of epidemic diseases in many places.
6. Pharmaceutical Outsourcing: in 2021, the average year-on-year growth rates of operating revenue, net profit after deduction and operating cash flow of key companies in the pharmaceutical outsourcing sector were 33%, 62% and 15% respectively, achieving rapid growth. Deduct net profit not attributable to parent company, including Shanghai Medicilon Inc(688202) (+ 120%), Joinn Laboratories (China) Co.Ltd(603127) (+ 82%), Porton Pharma Solutions Ltd(300363) (+ 74%), Hangzhou Tigermed Consulting Co.Ltd(300347) (+ 74%), Wuxi Apptec Co.Ltd(603259) (+ 70%). 2022q1 continues to maintain rapid growth. The average year-on-year growth rates of operating revenue, net profit attributable to parent company after deduction and operating cash flow of key companies were 23%, 70% and 54% respectively, and continued to maintain rapid growth.
Deduct the net profit not attributable to the parent company, including Porton Pharma Solutions Ltd(300363) (+ 406%), Asymchem Laboratories (Tianjin) Co.Ltd(002821) (+ 276%), Wuxi Apptec Co.Ltd(603259) (+ 107%), Shanghai Medicilon Inc(688202) (+ 72%), Joinn Laboratories (China) Co.Ltd(603127) (+ 67%) and Hangzhou Tigermed Consulting Co.Ltd(300347) (+ 65%).
7. Characteristic APIs: in 2021, the average year-on-year growth rates of operating revenue, net profit after deduction and operating cash flow of key companies were 23%, 18% and 28% respectively Zhejiang Jiuzhou Pharmaceutical Co.Ltd(603456) , Zhejiang Ausun Pharmaceutical Co.Ltd(603229) , Brightgene Bio-Medical Technology Co.Ltd(688166) and Zhejiang Starry Pharmaceutical Co.Ltd(603520) performed well, and Zhejiang Xianju Pharmaceutical Co.Ltd(002332) , Nanjing King-Friend Biochemical Pharmaceutical Co.Ltd(603707) also performed well Zhejiang Tianyu Pharmaceutical Co.Ltd(300702) affected by the fluctuation of exchange rate and product price, the growth rate slowed down or even fell sharply, Zhe Jiang Hua Hai Pharmaceuticalco.Ltd(600521) affected by the decline of export sales of sartan raw materials and preparations, the profit side fell sharply.
In the first quarter of 2022, cdmo business made great efforts, and the epidemic control affected the performance of some companies. The average year-on-year growth rates of operating income, net profit attributable to parent company after deduction and operating cash flow of key companies were 29%, 31% and 626% respectively Zhejiang Jiuzhou Pharmaceutical Co.Ltd(603456) , Ningbo Menovo Pharmaceutical Co.Ltd(603538) , Zhejiang Ausun Pharmaceutical Co.Ltd(603229) achieved rapid growth Zhejiang Jiuzhou Pharmaceutical Co.Ltd(603456) and Ningbo Menovo Pharmaceutical Co.Ltd(603538) mainly benefit from the rapid growth of cdmo business, Zhejiang Ausun Pharmaceutical Co.Ltd(603229) mainly driven by the rapid development of cro / cdmo business and the rapid growth of sales of some mature API varieties.
8. Pharmaceutical business: the overall revenue of the sector has maintained a steady growth trend, and the profit is under pressure due to the repeated growth of the epidemic. In 2021, the average growth rates of the revenue of key enterprises and the net profit returned to the parent after deducting non profits were 14% and 3% respectively. In the first half of 2021, due to the low base effect in the same period last year, the growth rate of the overall sector was high. Since the second half of 2021, due to the repeated epidemic and the switching of the medical insurance system, the performance of offline chain pharmacies has been under pressure and the growth rate has slowed down. In 2022q1, the average growth rates of the revenue and net profit of key enterprises in the pharmaceutical business sector after deduction were 14% and 2% respectively. The revenue growth remained stable, and the profit growth further slowed down due to the repeated epidemic.
9. Traditional Chinese medicine: with strong policy support, the industry ushered in a golden period of development. In 2021, the average year-on-year growth rates of operating revenue, net profit attributable to parent company after deduction of non-profit and operating cash flow of key companies were 13%, 28% and 339% respectively. In 2022q1, the average year-on-year growth rates of operating revenue, net profit attributable to parent company after deduction and operating cash flow of key companies were 0%, 12% and 239% respectively, mainly due to the decline of performance growth of Shijiazhuang Yiling Pharmaceutical Co.Ltd(002603) due to the decline of epidemic product sales, while the performance of other key traditional Chinese medicine enterprises still maintained steady growth.
Investment strategy of pharmaceutical sector: the marginal impact of Q2 epidemic is expected to be reduced, focusing on epidemic repair and undervaluation, and seizing the opportunity of high-quality asset correction.
Short term perspective:
I. continue to pay attention to the main line of the epidemic and normalize nucleic acid testing. Shanghai, Shenzhen, Guangzhou and other cities have opened hundreds of normalized nucleic acid free sampling points respectively, and pay attention to nucleic acid testing service providers. Relevant targets: Guangzhou Kingmed Diagnostics Group Co.Ltd(603882) , Guangdong Hybribio Biotech Co.Ltd(300639) .
II. The marginal impact of Q2 epidemic is expected to be reduced, focusing on epidemic repair and attention underestimate.
1. Rapid growth, continuous improvement of performance and reasonable valuation range.
1) vaccines: Beijing Wantai Biological Pharmacy Enterprise Co.Ltd(603392) , Chongqing Zhifei Biological Products Co.Ltd(300122) and Shenzhen Kangtai Biological Products Co.Ltd(300601) ;
2) oral consumables: Yantai Zhenghai Bio-Tech Co.Ltd(300653) (active biological bone will be approved soon);
3) life related upstream: Jenkem Technology Co.Ltd(688356) (PEG derivative), Nanjing Vazyme Biotech Co.Ltd(688105) (molecular enzyme), Acrobiosystems Co.Ltd(301080) (recombinant protein reagent).
2. Downside risk is limited, waiting for Fundamentals to catalyze.
1) blood products sector (leading enterprises are expected to benefit from the 14th five year plan of pulp stations in many provinces and further open the growth of pulp volume, including Beijing Tiantan Biological Products Corporation Limited(600161) and Hualan Biological Engineering Inc(002007) );
2) pharmacy sector ( Yifeng Pharmacy Chain Co.Ltd(603939) , Yixintang Pharmaceutical Group Co.Ltd(002727) , Lbx Pharmacy Chain Joint Stock Company(603883) , Dashenlin Pharmaceutical Group Co.Ltd(603233) , Shenzhen Mindray Bio-Medical Electronics Co.Ltd(300760) (short-term policy disturbance does not change the logic of long-term development);
3) private service leaders: haijiya medical and Jinxin reproductive;
4) China sublingual desensitization faucet Zhejiang Wolwo Bio-Pharmaceutical Co.Ltd(300357) ;
5) China’s leading pharmaceutical glass enterprise Shandong Pharmaceutical Glass Co.Ltd(600529) .
6) angel of the times (local invisible orthodontic leader)
Medium and long term perspective: focus on the invariance in change and look for opportunities for relative certainty
With the continuous expansion of the impact of centralized mining, the opportunity at the investment level lies in that the foundation for the establishment of centralized mining is that “multiple enterprises supply mutually replaceable varieties, and the production capacity can be supplied indefinitely in theory”. The basis for enterprises to maintain product price and profit space is the competition pattern, and the dynamic excellent competition pattern lies in the ability to continuously develop products and product iteration, which remains unchanged.
Start DRG / Dip reform in 2022. As a means of payment, the core role of DRGs is to achieve a balance between improving the efficiency and quality of diagnosis and treatment and ensuring the sustainability of medical insurance through refined medical insurance management. Hospitals that cannot actively adapt to the rules of the game will be eliminated. The opportunity at the investment level lies in that excellent private medical institutions have paid more attention to cost control for a long time, with higher operation efficiency and competitive advantage.
The general trend of industrial development is: China Meheco Group Co.Ltd(600056) industrial manufacturing is upgraded, the competitiveness is continuously improved, and moves upstream in the global production value chain.
The competitiveness of upstream raw materials is prominent:
1) biological “core” – life science support industrial chain: domestic enterprises have developed rapidly, reagent quality has reached the international leading level, and their competitiveness has been continuously improved. Entering the overseas market through global comparative advantage, China benefits from domestic alternative logic, with high growth and great development potential.
2) IVD raw materials and consumables: covid-19 epidemic opens the window for the transfer of global IVD raw materials and consumables production and supply chain to China.
Accelerated internationalization process: with the breakthrough of key technologies of Chinese enterprises, not only the localization rate of the Chinese market is accelerating, but also some high-quality enterprises have the strength to compete with international giants.
1. Manufacturing upgrading of pharmaceutical industry and continuous improvement of Competitiveness:
Upstream: life science support industry chain, IVD raw materials and consumables, related targets: Nanjing Vazyme Biotech Co.Ltd(688105) , Sino Biological Inc(301047) , Acrobiosystems Co.Ltd(301080) , Suzhou Nanomicro Technology Co.Ltd(688690) ;
High end medical devices: endoscope and sequencer, related subjects: Shenzhen Mindray Bio-Medical Electronics Co.Ltd(300760) , Qingdao Novelbeam Technology Co.Ltd(688677) , Sonoscape Medical Corp(300633) , Aohua endoscope, Micro-Tech (Nanjing) Co.Ltd(688029) ; Huada Zhizao (IPO application in progress);
International layout of medical devices, related subjects: Shenzhen Mindray Bio-Medical Electronics Co.Ltd(300760) ;
Others: Jenkem Technology Co.Ltd(688356) , Shandong Pharmaceutical Glass Co.Ltd(600529) .
2. Pay attention to the supply pattern: blood products, related subjects: Beijing Tiantan Biological Products Corporation Limited(600161) , Boya Bio-Pharmaceutical Group Co.Ltd(300294) and Pacific Shuanglin Bio-Pharmacy Co.Ltd(000403) ; Desensitization preparation, related subject matter: Zhejiang Wolwo Bio-Pharmaceutical Co.Ltd(300357) .
3. Private medical service sector with differentiated competition. Ophthalmology, Aier Eye Hospital Group Co.Ltd(300015) ; Dentistry, Topchoice Medical Co.Inc(600763) ; Assisted reproduction, Jinxin reproduction; Cancer treatment services, Hagia.
4. Pharmacy sector. Related objects: Yifeng Pharmacy Chain Co.Ltd(603939) , Dashenlin Pharmaceutical Group Co.Ltd(603233) , Lbx Pharmacy Chain Joint Stock Company(603883) and Yixintang Pharmaceutical Group Co.Ltd(002727) .
5. Aging and consumption upgrading.
Class II vaccine, related targets: Chongqing Zhifei Biological Products Co.Ltd(300122) , Beijing Wantai Biological Pharmacy Enterprise Co.Ltd(603392) and Changchun Bcht Biotechnology Co(688276) ; Invisible orthodontics, related subjects: Angel of the times;
Risk tips
Policy risk, price risk, underperformance risk, product R & D risk, underperformance risk, medical accident risk, uncertainty of overseas covid-19 virus epidemic, underperformance of M & A integration and other risks.
