August review: In August 2023, the pharmaceutical and biological sector fell by 4.76%, and the CSI 300 fell by 6.21% during the same period. The pharmaceutical sector outperformed the CSI 300 by about 1.45%, ranking 11th among the 31 sub-sectors. This month, the sub-sectors of medical services , traditional Chinese medicine , pharmaceutical business , chemical pharmaceuticals , medical equipment , and biological products fell by 1.47%, 3.20%, 3.97%, 5.18%, 7.24%, and 7.92% respectively. August is the window period for the intensive disclosure of semi-annual results. Overall pharmaceutical results are relatively flat, mostly in line with expectations; at the same time, extensive and far-reaching changes have taken place in the macroeconomy, financial environment, industry policies and other aspects . In the complicated environment, the pharmaceutical sector still has no clear main line. Without significant changes in the fundamentals of the industry, the market pays more attention to financial factors. Small and medium-sized stocks at the bottom with good chip structure, catalyzed by individual events and logical deductions, short-term stock prices The performance is outstanding, let’s take a closer look at the rapid rotation of opportunities for multiple themes such as weight loss and blood sugar reduction, medical circulation, performance catalysis, and safety and risk avoidance.
Looking forward to September: Under the sluggish overall market sentiment and the existing game environment, the weight of capital factors such as stock prices and chip structure has increased, and edge catalysis is still very important. Therefore, in the short term, the two elements of "bottom" and "edge catalysis" are important considerations. At present, most targets in the pharmaceutical sector are basically in the bottom range from the perspective of stock prices. We estimate that the marginal changes we can expect in September are mainly: 1) Q3 fundamental improvement: it is recommended to pay attention to the export of specialty APIs and low-value consumables in the industrial chain; Come in for peak season flu vaccines, etc. 2) Changes in policy: attach importance to the development and implementation of anti-corruption, and be optimistic about the correction of leading companies such as innovative drugs , rigid drugs, and impression equipment. In vitro diagnosis, etc. , which are expected to be implemented through centralized procurement . 3) Hot topic catalysis: GLP-1 polypeptide weight loss industrial chain, etc. From a mid- to long-term perspective, the current TTM valuation of the pharmaceutical sector is close to the 2018Q3 level, and the bottom has been fully consolidated. We advocate maintaining strategic focus and historical patience, and grasping a proactive layout from the perspective of industrial development trends, aiming to be broad but meticulous, and avoid retracement and consumption. , waiting for the dawn in the cold wind and depression. We are optimistic about the upgrade of domestic pharmaceutical innovation, consumption, and manufacturing in the long run, and grasp the value opportunity of the bottom leader.
Summary of the 2023 interim report: Q2 results have improved month-on-month, and we have gradually emerged from the disruption of the epidemic. In the first half of 2023, the cumulative revenue of listed pharmaceutical companies increased by 4.1%, total profits fell by 20.5%, and net profits after non-profits fell by 24.2%. The growth rate of revenue and profit has declined compared with the same period last year. The revenue growth rate has dropped by 6.6 pp, and the growth rate after excluding non-net profit has dropped by about 37.9 pp. The core factor for the slowdown in revenue growth and decline in profits is still the base effect of the new coronavirus, followed by domestic and foreign macroeconomics, investment and financing environment, and damage to exports. Specifically, it is mainly due to: 1) the high base effect of public health emergency events such as vaccines, new crown antigens, and nucleic acid testing in the same period of 2022H1; 2) the reduction of 2023H1 new crown event-related products (raw materials, finished products, production equipment, etc.) and money receivable. 3) The end of 2023Q1 epidemic caused a short-term disorder in the treatment order; 4) Overseas demand and inventory disturbances affected the purchase of export orders. 5) Due to the impact of macroeconomics at home and abroad, the investment and financing of medicines has cooled down, and the demand for innovative industrial chains has been damaged in the short term.
On a quarterly basis, Q2 revenue increased by 5.9% year-on-year, total profits fell by 14.2%, and non-net profits decreased by 11.8%. Q2 revenue and profit growth have improved significantly from the previous quarter, increasing by 3.5pp and 20.4pp respectively. We estimate that the main reasons are: 1) the low base caused by epidemic control in the same period last year; 2) the pharmaceutical industry has gradually emerged from the impact of the epidemic, and in-hospital treatment and consumer demand continue to recover. Q2 operating data confirms that the pharmaceutical sector is improving quarter by quarter. We believe that multiple factors such as macroeconomics, investment and financing data, overseas demand, inventory reduction, treatment and consumption recovery, and pharmaceutical policies are all expected to improve, and further improvements are expected in the second half of the year.
Sub-sectors: Traditional Chinese medicine and circulation performed well, and the base of the epidemic affected the growth rate of equipment, biological products , and medical services . The order of revenue growth in the first half of 2023 is pharmaceutical business (+14.62%), traditional Chinese medicine (+14.07%), chemical preparations (+6.41%), biological products (+5.90%), chemical raw materials (+0.01%), medical Services (-1.77%), medical equipment (-31.47%); the growth rate of non-net profits in the first half of 2023 is ranked as Chinese medicine (+32.61%), pharmaceutical business (+ 6.89%), chemical preparations (+ 6.47%), Biological products (-10.08%), medical services (-13.36%), chemical raw materials (-22.47%), and medical devices (-61.67%). The tail epidemic combined with the surge in demand for COVID-19 self-treatment drugs in the second quarter, driving the performance of the retail pharmacy sector to continue to improve; the traditional Chinese medicine sector benefited from the release of policy dividends, strong demand for anti-epidemic drugs and post-epidemic supplements, and industry prosperity continued to improve. Segment perspective: Private hospitals, pharmacies, blood products and other sectors related to in-hospital treatment and consumer medical care are recovering steadily, while upstream life sciences related to innovation and export industrial chains, specialty APIs, etc. are under short-term pressure. In vitro diagnosis and ICL are affected by the new coronavirus base.
The key recommendations of Zhongtai Medicine fell by an average of 2.29% in August, outperforming the pharmaceutical industry by 2.47%, including WuXi AppTec (+13.72%), United Lab (+12.52%), Pharmaron (+5.30%), and Sunshine Novo (+13.72 %). +4.02%) and other performances are outstanding.
Market dynamics: An analysis of the pharmaceutical sector from the beginning of 2023 to the present shows that the pharmaceutical sector has a return rate of -10.9%, and the absolute return rate of the CSI 300 during the same period is -2.7%. The pharmaceutical sector underperformed the CSI 300 by about 8.1%. In August 2023, the pharmaceutical and biological sector fell by 4.76%, while the CSI 300 fell by 6.21% during the same period. The pharmaceutical sector outperformed the CSI 300 by about 1.45%, ranking 11th among the 31 sub-sectors. This month, the sub-sectors of medical services, traditional Chinese medicine, pharmaceutical business, chemical pharmaceuticals , medical equipment, and biological products fell by 1.47%, 3.20%, 3.97%, 5.18%, 7.24%, and 7.92% respectively. Calculated based on the 2023 earnings forecast valuation, the current valuation of the pharmaceutical sector is 22.7 times PE, the P/E ratio of all A shares (excluding the financial sector) is approximately 16.8 times, and the premium rate of the pharmaceutical sector relative to all A shares (excluding the financial sector) is 35.3% . Calculated by the TTM valuation method, the current valuation of the pharmaceutical sector is 25.8 times PE, which is lower than the historical average (36.0 times PE). The premium rate relative to all A-shares (excluding the financial sector) is 34.2%.
Danger reminder: There is a risk of policy disturbance, drug quality risk, and the public information used in the research report may have information lag or untimely updates.