Source: several DataVision

Author: Yan Zhangpan and Li Tianjiao

Most of the time, the problem of medical treatment is a matter of money.

In August 2011, the third year of the new health care reform plan, Zhan Jifu, who had many years of experience in finance and trade and drug supervision, came to Sanming, a small town in Fujian, to serve as vice mayor. With the wave of national health care reform, Sanming opened the "Sanming mode" at the rate of one document per month.

One year after the implementation of the Sanming model, the deficit of the health insurance fund was wiped out, and the cost of medicine dropped directly from 900 million to 570 million in two years, and cadres from all over the country came to Sanming to learn from it. Interestingly, the first person who came to Sanming to find out was not an official from the health department, but Wang Baoan, then vice minister of the Ministry of Finance.

Whether it is the health care reform that involves the whole people, or the fight against the epidemic that lasts for three years, it is essentially to calculate how much money there is and how to spend it. These decisions not only determine the flow of money, but also completely change the fate of many industries and companies.

These are several periods of history that have been rewritten by the epidemic in the past three years.

Medical wealth-building movement

The closer to the virus, the closer to the money.

01 Vaccines: from losses to hundreds of billions of profits

In China, there are only five companies that have approved the COVID-19 vaccine on the market, namely, Sino Biopharmaceutical, CANSINOBIO, Zhifei, Kangtai and Zhongsheng behind Sinopec. As for the vaccine competition, it is natural that the one who is the first to hand in the papers will have the highest profits.

In 2021, the net profit of Hexing reached 90.7 billion yuan, more than 100 times the total profit of the past five years; Zhifei made a net profit of 10.2 billion, an increase of 209% over the same period last year; and CANSINOBIO made a net profit of 1.9 billion yuan from a loss of 400 million yuan.

Beijing Kexing Zhongwei Biotechnology Co., Ltd., the main body of the vaccine, was originally owned by Sinovac Biotech, a listed US company, but the company was losing money from 2015 to 2019. In 2020, Sino Biopharmaceutical acquired a 15.03 per cent stake for US $515 million, so Sinoft's net profit was reflected in Sino Biopharmaceutical's statement.

Sinopec's source of profit is well known: it is the seventh vaccine certified by WHO and is used in more than 70 countries around the world.

According to financial data, the average price of each dose of vaccine is 37.5 yuan-but this is the price received by the Health Insurance Bureau. If calculated on the basis of the global supply of 2.7 billion animals in 2021, the average net profit per dose of vaccine is 33.50 yuan.

02 Consumables: tens of billions of net profit driven by the imbalance between supply and demand

The demand for consumables during the epidemic is mainly two, masks andGloves。

If there is no epidemic, masks and medical gloves are actually a very small and stable market. In January 2020, China's daily production capacity of face masks was only 10 million, but by the end of December, the number had soared to 500 million. This window of imbalance between supply and demand has become a window for many companies to create wealth.

There are 38 listed companies specializing in the manufacture of face masks in China, which made a net profit of 49 billion yuan in more than two years as of September last year.

The threshold for the production of masks is actually very low. In theory, as long as there is melt-blown cloth, anyone can open a mask production line at home. So Foxconn, which manufactures for Apple Inc, BYD, which builds cars, and China Petroleum & Chemical, which sells oil, is also doing it. The end result is that mask companies are so fragmented that none of them stand out.

In October 2021, Zhong Yimin, former secretary of the Jinxian County CPC Committee in Nanchang City, Jiangxi Province, was sentenced to 12 years in prison for taking bribes. In the briefing, the secretary also arranged for relatives to open a mask factory at the critical juncture of fighting the epidemic in early 2020.

But as medical consumables, the production threshold of gloves is much higher.

Compared with the mask can build a production line in a few days, the glove production line is easily invested in millions, and it will take 12-18 months to put into production. Before the outbreak, the main global production capacity was only eight domestic companies such as Yingke Medical, Blue Sail Medical and Malaysia's Top Glove.

In 2020 and 2021, Englishman's net profit was as high as 14.5 billion yuan, 70 years of money in two years at pre-epidemic levels.

In 2017, Yingke Medical submitted a prospectus in A-shares, raising a total of 630 million yuan, of which 530 million was used to expand the production capacity of all kinds of gloves, reaching 5.88 billion. At that time, the annual production capacity of Yingke was only about 10 billion, which could almost be said to be all in gloves.

According to the 12-18 month capacity construction time, from Inco to get the funds to start the expansion, to the formal production, it is exactly in 2019. Subsequently, the COVID-19 epidemic broke out in early 2020, a big bet, the stock price increased 20-fold, entering the 100 billion market capitalization club.

At the same time, the glove giant Blue Fan Medical, which competes with Yingke, switched to a stent before the outbreak and was directly included in the collection list. Top Glove in Malaysia stopped production due to the epidemic, missing the opportunity to ship gloves at the highest price.

Strong gambling is nothing, and all the people on the table of Zhengqiao card have run away, inexplicably winning.

03 Nucleic Acid: the Carnival of speculators

Nucleic acid testing is a new industry, and it has gone from zero to hundreds of billions of scale in just two years.

Zeshang Securities estimates that regular nucleic acid testing brings an increase in demand of 83 million person-days. Based on the current low price of 2.60 yuan, the country spends more than 215 million yuan on nucleic acid testing every day. 2022 is the third year of the epidemic. Due to the strong contagious characteristics of the Omicron variety, the detection interval has been shortened again and again. From June to December 2022, the total price of nucleic acid detection will exceed 46 billion yuan.

At present, there are mainly six listed nucleic acid testing concept stocks, with a total net profit of 32.814 billion yuan in the past three years. Based on the total profit of 1.218 billion in 2019, these six companies have made money in the past three years.

But that's not the scariest data.

If calculated in terms of "market share", the six companies have only a single-digit market share in regular nucleic acid testing, which means that there are a large number of unlisted nucleic acid testing laboratories that have made a lot of money out of public view.

By the end of this year, however, none of these laboratories had business to do.

04 antigen: foreigners' money is easier to earn

Tickets for antigens seem to be cheaper than nucleic acids.

By December 2022, there were 49 manufacturers of novel coronavirus antigen detection reagents in China (26 listed enterprises), of which 40 were approved by the State Drug Administration (19 listed enterprises).

Although some scalpers have fried a 20-person kit to 200 yuan, the antigen itself is a highly standardized product without any product differentiation or brand effect. who earns more money depends on who is purchased by the government.

The biggest winner of antigen is a company called Jiu'an Medical. Before the epidemic, he was just a small business that made money from home blood pressure monitors. he went public in obscurity for 10 years, with a total loss of 200 million yuan. Although everyone is making antigens, what makes Jiuan Medical unique is that it takes an order from the United States government.

At the end of 2021, Jiu'an Medical, which produced the transformational antigen self-test kit, received an order totaling US $1.775 billion, while in the case of no collection in the United States, the profit margin of the self-test box with a cost of 2-3 yuan was as high as 80%.

05 Drugs: hundreds of millions of dollars in small profits and quick sales

Compared with the first four industries, the profits of pharmaceutical companies are obviously not enough.

Even if the parent company of Lianhua Qingwen Pharmaceutical Co., Ltd., which has been sprayed with hot search, its net profit has doubled compared with that before the epidemic, and remains around NT $1 billion. Not to mention Xinhua Pharmaceutical, the raw material drug company of ibuprofen, made a net profit of only 293 million yuan in 2021, an increase of 51% over the same period last year, while Hendi Pharmaceutical's profit was not high, at 122 million yuan.

Even the sudden surge in demand at the end of 2022 will hardly lead to a surge in profits.

The reason lies in production capacity. Take Lianhua Qingwen as an example, its raw materials include raw materials such as Forsythia suspensa and Flos Lonicerae, whether these things are useful or not, but their cultivation requires a growth cycle, coupled with climate uncertainty, unable to cope with the rapid release of pulse demand from the market.

The same goes for ibuprofen: like masks and medical gloves, ibuprofen has been in balance between supply and demand for years, and it takes time to expand capacity and cannot quickly cover the short-term surge in demand. In addition, this kind of drugs are limited by the policy, so there is no way to start the price, so there is naturally no excess profit.

Wealth on paper

In these wealth-making myths, some companies have made real profits, while others' revenues are still on paper-yes, nucleic acid testing agencies.

During the normal nucleic acid testing period, residents do nucleic acid free of charge, and the funder is the local government. For listed nucleic acid testing institutions, this amount becomes an account receivable in the financial report.

The so-called accounts receivable simply means that the money is counted as income in the financial statement, but in fact, the company does not receive cash.

As of the third quarter of 2022, the accounts receivable of the six nucleic acid concept companies was 28.899 billion, 4.78 times that of 6.045 billion in 2019. The total profit in the same period was 32.814 billion, which is equivalent to 2/3 of the money that has not yet been received.

In the case of Dean Diagnostics, the company's profits totaled 5.421 billion from the beginning of 2020 to September 2022, but there were still 10.754 billion of accounts receivable at the end of September 2022. In other words, the company is actually losing money before the money comes to the account.

According to the prudent principle of accounting, the loss of bad debts should be calculated according to the proportion of the probability of bad debts. The probability of collecting accounts can be measured by the turnover time of accounts receivable, the longer the time, the greater the probability of bad debts.

From the perspective of absolute days, there are four out of six companies, and the turnover time of the latest accounts receivable is more than 4 months; from the perspective of relative days, the turnover days of accounts receivable in five of the six companies are longer than in 2020. The highest Dean diagnosis is even close to 150 days, with an accounting period of up to five months.

A similar situation occurs in the hotel industry. Due to the closure policy caused by the epidemic, the transformation of major hotel chains into isolated hotels is almost the only way to save themselves. On the other hand, part of the income of isolated hotels also comes from local finance.

Under normal circumstances, hotels face consumers directly and usually collect money in advance, so there is basically no problem of accounts receivable. However, during the epidemic, accounts receivable of some listed hotel chains soared, such as Huatian Hotel by more than 180%.

Did you make any money? I did make a profit. Where's the money? I have no idea.

Invisible Wealth: selling shovel people upstream

If we look a little further and observe the growth of revenue and net profit of listed companies owned by A shares and Hong Kong stocks, in the past three years of the epidemic, the people who have really benefited most are the "shovelers" in the upper reaches of various industries.

Or use a higher-tone word: upstream and downstream industries have appeared "K-type differentiation".

In 2021, for example, upstream companies such as materials and semiconductor equipment are far ahead of the healthcare industry in terms of revenue and net profit growth.

The essential reason is the impact of the epidemic on the supply chain, superimposed by global inflation, which leads to the promotion of upstream voice.

In terms of subdivision, for example, the lack of core has led to a surge in profits in the semiconductor industry, such as Shilan Micro; the popularity of new energy vehicles has led to the upstream enterprises to have "lithium" all over the world, pocketing most of the profits of the industrial chain.

The Carnival of the Capital Market

In the past three years, the total net profit of Yiling Pharmaceutical Co., Ltd was 3.9 billion yuan. However, with the high-spirited trend of the company in the secondary market, Wu Yiling, a major shareholder, increased its equity by 18.511 billion yuan in three months.

Under the epidemic, the sudden outbreak of demand for some commodities has upset the original balance of demand. This imbalance between supply and demand will be further played in the stock market, and then evolve into trading.

By the same token, Xinhua Pharmaceutical, a maker of ibuprofen, which has a nearly 40% market share, has recently been picked out by shareholders and become a new target of hype.

In December, Xinhua Pharmaceuticals achieved an increase of 136.8% in just 12 trading days, almost by the daily limit. During this period, Hualu Holdings, the largest shareholder, earned a total income of 5.781 billion yuan and a daily profit of 481 million yuan.

Another example is the Omicron subtype strain XBB.1.5, which accounts for up to 40% of the new cases. A printer repairman said through moments that XBB was easy to cause diarrhea and asked everyone to prepare montmorillonite powder in advance. As a result, rumors spread wildly, and montmorillonite powder was directly out of stock. On the first day of trading in 2023, five montmorillonite concept stocks rose by the daily limit.

Take Zhang Qinghua, Fangsheng's largest shareholder, as an example. On the first day of the New year's trading, a piece of pie fell from the sky and earned 1.37 small goals.

The end.

The vast majority of wealth-building stories in the epidemic have a similar logic: an otherwise very stable supply side suddenly encounters a demand side that is rapidly expanded by the epidemic, creating a huge gap between supply and demand, creating room for profit. The vast majority of companies did not anticipate their role in the epidemic.

In addition to publicly available listed companies, there are many epidemic-related businesses hidden in hidden corners. Southern Weekly reported that during the epidemic, water horses used for containment and control once became very tight materials. "the trader responsible for organizing the goods finally sold at 280 yuan per unit, and most of the prices were more than 100 yuan per unit."[1]". If the scale of the ban is large, some people can earn 1 million yuan in one night.

The history we have experienced is not only recorded in publications, but hidden between the lines of financial statements and prospectuses. Moreover, the latter is sometimes more real and cruel.

Edit / Viola