The reversal of market conditions and improvement in performance after the quarterly report will also bring investment opportunities in individual stocks in sectors such as chain pharmacies, Medical Devices, CXO, generic drugs, Traditional Chinese Medicine, and Medical Services, and it is recommended to increase investment.
According to the Zhitong Finance APP, Sinolink released a Research Report stating that the Pharmaceutical Sector has good risk resistance and growth offensive capabilities. The Innovative Drugs Sector has very low geopolitical and tariff risks and will continue to be the main growth line for the Pharmaceutical Sector, remaining Bullish on the growth potential of Innovative Drug companies in the Hong Kong and A-shares. At the same time, considering the impact of tariffs, there are Bullish opportunities for domestic substitution in Blood Products, Medical Devices, and Instruments. The reversal of prosperity and performance improvement after the first quarter report will also bring investment opportunities for individual stocks in the left side sectors such as chain pharmacies, Medical Devices, CXO, generic drugs, Traditional Chinese Medicine, and Medical Services, suggesting to increase investments.
Sinolink's main viewpoints are as follows:
This week, the Pharmaceutical Sector experienced a noticeable correction due to changes in the international tariff environment and fluctuations in geopolitical expectations.
However, the bank believes that the corrections in A-shares and Hong Kong stocks for Innovative Drugs are valuable opportunities for the following reasons:
1) China has a significant import deficit for Innovative Drugs: the import value of Western medicines and biochemical drugs far exceeds the export value.
2) Most of the Chinese Innovative Drugs go overseas through BD (Business Development, which involves authorizing the overseas development rights of drugs to foreign pharmaceutical companies) and NewCo (establishing a new overseas company to authorize pipelines and obtain equity). Essentially, this is an exchange of Intellectual Property and does not involve the manufacturing and export of specific pharmaceuticals, thus having low tariff fluctuation risk.
Pharmaceutical Sector
With the global recognition of China's technology strength increasing, the innovative capabilities and growth potential of Chinese pharmaceutical companies have also started to attract renewed attention from Capital Markets. The sector is Bullish on local original research "true innovation" pharmaceutical companies and those with leading high-level international introduction capabilities. It is recommended to pay attention to leading players, those expanding overseas, and companies making innovative progress.
Pharmaceutical Upstream
In 2024, for imports of Commodities from the USA, the import scale of precision instruments accounts for 7.8%, making it the fourth largest product category, and the sector is Bullish on domestic industry leaders with rich product reserves.
Biological Product
The supply side of Blood Products is highly concentrated, and the supply of plasma in our country is not enough to meet the domestic market demand for human albumin. In 2020, the supply gap for human albumin in the Asia-Pacific region corresponded to a plasma volume of over 10,000 tons. In 2024, our country issued 5,381 batches of human albumin, with foreign enterprises accounting for approximately 67% of the batches. The batch issuance of human albumin produced by enterprises located in the USA accounts for nearly 20%, and there is uncertainty in the domestic supply of human albumin produced in the USA. There is a significant substitution space for domestic human albumin, and it is recommended to pay attention to industry marginal improvements brought about by changes in policies.
Medical Instruments
Policies support innovation in high-end medical devices, and leading players in the field are expected to benefit over the long term. On April 9, United Imaging Healthcare released the uAI NEXUS "Meta-Wise" medical model, which has already given rise to more than 10 uAI "Meta-Wise" medical intelligent agents, empowering every segment of the medical scene.
Medical Services & Consumer Healthcare
Overall, this round of tariff increases or the catalyst for domestic substitution is driving local enterprises' technological upgrades and global capacity layout. It is recommended to focus on leading enterprises that have global supply chain management capabilities and high technical barriers, as well as clearly defined sub-sectors for domestic substitution.
Pharmacy
The Ministry of Commerce, the National Health Commission, and 12 other departments released the "Action Plan to Promote Healthy Consumption," which mentions strengthening the health promotion function of pharmacies. This program is expected to become an important catalyst for the continued healthy development of retail pharmacies in the health sector, while the function of pharmacies providing convenient access to medications is further certified. The Internet Hospital is expected to continue to be an important source of prescriptions for pharmacies. Against the backdrop of national emphasis on the silver economy and chronic disease management, the customer flow base of middle-aged and older populations in pharmacies is very solid.
