The Zhitong Finance app learned that Tianfeng Securities released a research report saying that the 2023H1 pharmaceutical distribution sector had impressive overall performance, and the retail and distribution sectors both achieved good growth. 1) Pharmaceutical distribution: Upstream and downstream expansion of the second growth curve+valuation system with Chinese characteristics, the pharmaceutical distribution sector is expected to usher in valuation recovery. 2) Retail pharmacies: The concentration of the industry is expected to accelerate after the epidemic, and the outpatient policy will promote the outflow of prescriptions. The bank believes that the core logic of the pharmaceutical distribution industry comes from valuation restoration under policy optimization. It suggests looking at the changing trends of enterprises from a medium term perspective, and suggests focusing on: 1) pharmaceutical distribution; 2) retail pharmacies.
Tianfeng Securities's main views are as follows:
The overall performance of the 2023H1 pharmaceutical distribution sector was impressive, and both the retail and distribution sectors achieved good growth
There are a total of 25 listed companies in the pharmaceutical distribution sector (not included in ST/*ST shares, including two Hong Kong stock companies), and the overall operating income of the 2023H1 sector increased 13.58% year on year; net profit from net income fell 0.23% year on year; net profit after deducting non-return net profit increased 0.49% year on year; leading companies continued to explore business format transformation, and the second growth curve was impressive.
There are a total of 6 listed companies in the retail pharmacy sector, and the overall operating income of the 2023H1 sector increased by 21.43% year on year; net profit from net profit increased 24.21% year on year; net profit after deducting non-return net profit increased 25.47% year on year; mainly due to the optimization of domestic epidemic prevention and control policies in 2022Q4, strong demand for drug use at the 2023H1 terminal led to a gradual recovery in passenger flow.
1) Pharmaceutical distribution: Upstream and downstream expansion of the second growth curve+valuation system with Chinese characteristics, the pharmaceutical distribution sector is expected to usher in valuation recovery.
The valuation of the distribution sector has been low for a long time. The bank believes that the overall growth rate of the distribution business is slow, and at the same time, with the normalization of pharmaceutical volume procurement, the industry's gross profit margin has been compressed; in recent years, leading companies have actively explored new business formats and used channel advantages to drive upstream and downstream. More profitable new businesses such as the pharmaceutical industry and pharmaceutical retail have grown brilliantly, which is expected to improve the industry format and drive valuation recovery.
2) Retail pharmacies: The concentration of the industry is expected to accelerate after the epidemic, and the outpatient policy will promote the outflow of prescriptions.
In February 2023, the National Health Insurance Administration issued the “Notice on Further Accomplishing the Integration of Designated Retail Pharmacies into Outpatient Outpatient Coordination Management”, which actively supports designated retail pharmacies to launch integrated outpatient services. This policy is expected to substantially promote the outflow of prescriptions. Retail pharmacies, as an important terminal for receiving health insurance funds, are expected to further benefit from outflow of prescriptions. At the same time, 2023H1 leading pharmacies continue to accelerate store expansion. Some enterprises have already entered the scale of 10,000 stores, and leading pharmacies are expected to further seize the opportunity to accelerate the increase in industry concentration.
Investment advice:
Pharmaceutical distribution: It is recommended to focus on national distribution enterprises with wide regional coverage and regional leaders with significant improvement flexibility: China Resources Pharmaceutical (03320), Liuyao Group (603368.SH), Shanghai Pharmaceutical (601607.SH), and Heavy Medicine Holdings (000950.SZ);
Retail pharmacies: It is recommended to focus on leading pharmacies that have made good progress in outpatient coordination: Dashenlin (603233.SH), Yifeng Pharmacy (603939.SH), Yixintang (002727.SZ), Jianzhijia (), ordinary people (), and Shu Yu Pingmin (301017.SZ). 605266.SH 603883.SH
Risk warning:The risk of policy fluctuations, the performance of individual companies falling short of expectations, the risk of market shocks, and the progress of the COVID-19 pandemic is uncertain.