This article was transferred from the WeChat account “Xingzheng Pharmaceutical Health”.
Key points of investment
The quarterly recovery trend continued in 2020Q4, and the annual performance acceleration trend was obvious: Societe Generale Securities predicted the 2020 annual results of the 57 listed pharmaceutical companies covered, with a net profit growth rate of more than 50% for the full year of 2020; 11 with a net profit growth rate of 30%-50%; 17 with a net profit growth rate of 20% to 30%; 11 companies with a net profit growth rate of 0-20%; there are 7 companies with a year-on-year decline in net profit; a total of 1 company made business situation forecasts and updates but did not predict the profit side yet.
Investment strategy: Looking at the 2020Q4 single quarter, various industry segments in the pharmaceutical sector have further recovered. Currently, domestic work and life have basically returned to normal. At the same time, the number of outpatient visits and surgeries in hospitals is approaching normal levels. Despite a rebound in health incidents in many parts of the country in the fourth quarter, Societe Generale Securities expects domestic health events to remain within a manageable range. After being tested by this public health incident, the public is paying more and more attention to health care. Looking at the breakdown, Societe Generale Securities expects companies in the medical service, innovative drug industry chain, medical devices, and self-funded consumer sectors to perform well in the fourth quarter.
Looking ahead to 2021, Societe Generale Securities suggests focusing on (1) medical services+self-funded consumption: the consumer medical sector is the health insurance and immunization sector, and most varieties of 2020H1 were negatively affected by health events, and high performance growth in 2021 was determined. It is possible to see the low layout part of leading companies on various tracks that are impacted by customer phased health events in the long term, including Aier Ophthalmology, Jinyu Medicine, and Tongze Healthcare; leading pharmacies Yifeng Pharmacy, Dashenlin, Yixintang, and ordinary people; in branded consumer products; In self-funded medical treatment, pay attention to varieties not covered by medical insurance, such as We Wu Biology, Ed Biotech, Changchun Hi-Tech, etc. (2) Innovative drugs and industrial chain: investors are advised to pay attention to the market capitalization leaders among them —Medicine, Ming Kang De(02359),Tiger Pharmaceuticals(03347),Yao Ming Biology(02269), etc., companies with outstanding performance in segmented racetracks - Gloria Ying,Kanglong Chemical(03759), Pharmaceutical Stone Technology, Ed Biotech, etc.; Big Pharma with various systemic advantages in R&D, market access, sales, etc.: Hengrui Pharmaceutical,Chinese Biopharmaceuticals(01177),Hanson Pharmaceuticals; Emerging Biotech companies: Some companies with BIC and FIC potential, such asCinda Biotech(01801),Junshi Biology(01877),Nuochengjianhua-B(09969),Kangfang Biological-B(09926),Corning Jerry Pharmaceuticals-B(09966), Borui Pharmaceutical; (3) Medical devices on the high-growth circuit: a new generation of independent innovation/ import substitution medical device companies will face opportunities for valuation system reengineering (similar to the previous innovative drug Pipeline valuation) and accelerated growth in the longer term. Related companies such as Mindray Healthcare, Antu Biotech, and new industries with superchemiluminescence; endoscopic consumables Nanwei Medicine; orthopedic consumables Sanyou Medical; Qiming Medical in the TAVR field (02500),Peijia Medical-B(09996); Aorta, peripheral consumables, electrophysiology fieldsMinimally invasive medicine(00853), Cardiac Medicine, Huitai Medical, etc. (4) High-growth vaccine: It is expected to usher in a “sharp rise in volume and price”. It is recommended to focus on Changchun Hi-Tech, Kangtai Biology, Hualan Biology,CONCINO BIO-B(06185), Zhifei Biotech; (5) Blood products: There is a possibility that the quantity and price of albumin will rise sharply in 2021, and the blood products industry has long-term investment value. It is recommended to pay attention to Tiantan Biology, Hualan Biology, etc.
The Q4 performance of some targets fell short of expectations, health events were uncertain, market competition intensified, and industry policies were more stringent than expected
2020 Annual Results Forecast Overview
The 2020 full-year performance acceleration trend is obvious: Societe Generale Securities has predicted the full-year results of the 57 listed pharmaceutical companies covered. It is estimated that 10 companies will have a net profit growth rate of more than 50% in 2020; 11 with a net profit growth rate of 30% to 50%; 17 companies with a net profit growth rate of 20% to 30%; 11 companies with a net profit growth rate of 0-20%; 7 companies with a year-on-year decline in net profit; and a total of 1 company that has updated business conditions but has not yet predicted the profit side.
A total of 10 companies are expected to increase their net profit by more than 50% year-on-year in 2020: Betta Pharmaceuticals (up 147%-151% year on year, EPS 1.38-1.40 yuan (after fixed increase)), Wantai Biotech (up 230%-275% year on year, EPS 1.59-1.81 yuan), Pharmaceuticals (up 60%-65% year on year, EPS 1.22-1.25 yuan), Jiuzhou Pharmaceutical (up 51%-57% year on year, EPS 0.44-0.46 yuan), Tiger Pharmaceuticals (up 90%-110% year on year), Tiger Pharmaceuticals (up 90%-110% year on year EPS 1.83-2.02 yuan), Kanglong Chemical (up 85%-90% year on year, EPS 1.27-1.31 yuan), Jianfan Biotech (up 49%-53% year on year, EPS 1.06-1.09 yuan), Yuyue Medical (up 121%-143%, EPS 1.66-1.82 yuan), Jinyu Medical (up 230%-270% year on year, EPS 2.89-3.24 yuan), Dashenlin (up 47%-57% year on year, EPS 1.57-1.67 yuan).
A total of 11 companies are expected to increase their net profit by 30-50% year-on-year in 2020: Mike Biotech (up 38%-48% year on year, EPS 1.30-1.40 yuan), Cardiac Healthcare (up 40%-55% year on year, EPS 2.76-3.05 yuan), Zhifei Biotech (up 38%-41% year on year, EPS 2.05-2.08 yuan), Jianyou Co., Ltd. (up 34%-42% year on year, EPS 0.8-0.92 yuan), Gloria Ying (up 35%-40% year on year, EPS 3.08-3.20 yuan), Zhao Derivative medicine (up 40% to 45% year on year, EPS 1.10-1.14 yuan), Lizhu Group (up 33%-38% year on year, EPS 1.83-1.90 yuan), Haier Biotech (note: the data here is on the revenue side, up 35%-38% year on year), Aibo Healthcare (up 40%-53% year on year, EPS 0.99-1.07 yuan), Mindray Healthcare (up 36%-42% year on year, EPS 5.22-5.44 yuan), Yifeng Pharmacy (up 35%-41% year on year, EPS 1.38-1.44 yuan).
A total of 17 companies are expected to increase their net profit by 20-30% year-on-year in 2020: Hengrui Pharmaceutical (up 22%-25%, EPS 1.22-1.25 yuan), Aier Ophthalmology (up 25%-31%, EPS 0.42-0.44 yuan), Sanyou Medical (up 25%-27% year on year, EPS 0.59-0.61 yuan), Dabo Medical (up 24%-26% year on year, EPS 1.43-1.46 yuan), Weiss Healthcare (up 28%-31% year on year, EPS 1.87-1.91 yuan), Kangtai Biotech (up 20%-25% year on year, EPS 1.01-1.05 yuan), Pharmaceutical Stone Technology (up 15%-25% year on year, EPS 1.14-1.24 yuan (after fixed increase)), Titan Technology (up 23%-27% year on year, EPS 1.20-1.24 yuan), Bairen Healthcare (up 26%-31% year on year, EPS 0.83 to 0.86 yuan), Hualan Biotech (up 17%-27% year on year, EPS 1.07-1.16 yuan), Wandong Medical (up 27%-31% year on year, EPS0.40 - 0.40 yuan) 0.41 yuan), ordinary people (up 21%-30% year on year, EPS 1.51-1.62 yuan), Yixintang (up 22%-26% year on year, EPS 1.24-1.28 yuan), health yuan (year on year increase 17%-23%, EPS 0.54-0.56 yuan), Yunnan Baiyao (up 19%-35% year on year, EPS 3.90-4.43 yuan), Ed Biotech (up 20% -25% year on year, EPS 0.73-0.76 yuan), Lepu Healthcare (up 23%-33% year on year, EPS 1.17- 1.17 yuan) 1.27 yuan).
A total of 11 companies are expected to increase their net profit by 0-20% year-on-year in 2020: Huadong Pharmaceutical (4%-6% year-on-year increase, EPS 1.68-1.71 yuan).Fosun Pharmaceuticals(year-on-year increase of 9%-14%, EPS 1.41-1.48 yuan),Shanghai Pharmaceuticals(up 8%-11% year on year, EPS 1.55-1.59 yuan), Antu Biotech (up 1%-10% year on year, EPS 1.73-1.89 yuan), Kanghong Pharmaceutical (up 5%-15% year on year, EPS 0.86-0.94 yuan), Enhua Pharmaceutical (up 15%-20% year on year, EPS 0.76-0.79 yuan), Tianshi Li (up 0%-10% year on year, EPS 0.66-0.73 yuan), Tonghua Dongbao (up 10%-15% year on year, EPS 0.44-0.46 yuan), Gan Li Growth of 7%-11%, EPS 2.21-2.30 yuan), new industries (year-on-year increase of 16%-23%, EPS 2.17-2.30 yuan), Wuwu Biotech (year-on-year increase (-5%) -5%, EPS 0.54-0.60 yuan).
A total of 7 companies are expected to decline in year-on-year net profit in 2020: Colon Pharmaceutical (-20%) - (-8%), EPS 0.52-0.60 yuan), Nanwei Medicine (year-on-year increase (-15%) - (-0%), EPS 1.94-2.28 yuan), China Resources 39 (year-on-year increase (-18%) - (-10%), EPS 1.77-1.94 yuan), Tongrentang (year-on-year increase (-15%) - (-10%), EPS 0.61-0.72 yuan), Kangyuan Pharmaceutical (year-on-year increase) (-45%) - (- 35%), EPS 0.47-0.56 yuan), Jichuan Pharmaceutical (year-on-year increase (-22%) - (-10%), EPS 1.55-1.79 yuan), established medical treatment (year-on-year increase (-2%) - (-1%), EPS 0.24-0.25 yuan).
There is 1 company that does not predict the year-on-year change. There is 1 company in total: Tianzhi Airlines (due to negative comparable data for the same period in 2019, no year-on-year change data has been provided).
investment strategy
Looking at the 2020Q4 single quarter, various industry segments in the pharmaceutical sector have further recovered. At present, domestic work and life have basically returned to normal. At the same time, the number of outpatient visits and surgeries in hospitals is also approaching normal levels. Despite a rebound in health incidents in many parts of the country in the fourth quarter, Societe Generale Securities expects domestic health events to remain within a manageable range. After being tested by this public health incident, the public is paying more and more attention to health care. Growth recovery in various industry segments in the Q4 single quarter was divided. The following Societe Generale Securities discussed and analyzed each segment.
1) Medical services
As health incidents improved, the overall performance of medical service companies recovered rapidly. Leading companies such as Aier Ophthalmology and Tongce Healthcare basically fully recovered in the fourth quarter. Due to the gradual recovery of outpatient care volume and the gradual release of backlog demand in the fourth quarter, the year-on-year growth rate was high; for the ICL sector, Jinyu Medical continued to maintain a high growth rate in the fourth quarter, driven by testing. There is uncertainty about the number of tests and health events, but as the number of surgeries in hospitals gradually recovered, routine testing and special examination services resumed rapidly.
2) Innovative pharmaceutical industry chain
The overseas health incident situation in the fourth quarter was still not optimistic. The trend of industrial transfer was further strengthened. CRO/CDMO, the domestic innovative drug industry chain, undertook some orders from Europe and the US. The order volume was sufficient, production capacity was steadily released, and performance continued to grow steadily. CRO companies such as Pharmaceutical Ming Kangde and Zhaoyan New Pharmaceutical continued to grow rapidly under the continuous positive trend of the industry, while CDMO company Gloria Ying's performance continued to grow steadily.
3) Medical devices
Medical device companies recovered relatively quickly in the fourth quarter, regardless of whether they chose a new period or just needed to basically return to normal levels of operation. Demand for liver disease products, such as Jianfan Biotech, has gradually recovered on the basis of continued steady growth in the previous period; innovative medical device companies with a smaller base have also recovered better. For example, the number of abdominal aortic surgeries during the selected period of cardiac care has further rebounded, driving performance growth. On this basis, new products are also being rapidly released. In the long run, the medical device sector, especially the innovative medical device sector, will face relatively little policy pressure in the future. Currently, most device segments are mainly imported products, and domestic products have a low market share. Currently, domestically produced products that are clinically adapted and approved by doctors are appearing one after another on the market, and the trend of domestic substitution is unstoppable.
4) Out-of-pocket consumption category
The self-funded consumption circuit has both relatively rigid and stable downstream demand and the driving force for consumption upgrades. It is an ideal safe haven under health insurance fee control. Regarding the self-funded consumer sector, such as the pharmacy sector, retail pharmacies as a whole have maintained a rapid growth trend since this year. Companies in the pharmacy sector, such as Yifeng Pharmacy, Dashenlin, Yixintang, and Ordinary People, have performed well. Societe Generale Securities expects several major pharmacies to grow more than 20% on the profit side in a single quarter.
5) Innovative drugs
Looking at the fourth quarter, there was a certain degree of differentiation within companies in the innovative drug sector, and industry leaders performed well. Societe Generale Securities expected Hengrui Pharmaceutical's net profit growth rate in Q4 to reach more than 40% in a single quarter. Overall, innovative drug circuit companies have benefited from the gradual implementation of national policies and R&D pipelines of various innovative pharmaceutical companies. The overall industry has maintained a high level of prosperity, and health insurance is expected to help accelerate.
6) Branded Chinese Medicine and OTC
As it has become normal for the general public to wear masks in the prevention and control of health incidents, the sales performance of OTC drugs related to respiratory diseases in the fourth quarter was still poor, and OTC drugs other than respiratory tract generally recovered steadily. In the context of consumption upgrades, brand OTC has a brand premium effect. With its high quality and market reputation, it is expected to further increase market share, and the performance of branded OTC companies is expected to continue to recover.
7) Biological products
The overall recovery trend of vaccine sector companies continued in the fourth quarter. As health incidents were effectively controlled, the company's business operations gradually returned to normal. For example, Kangtai Biotech's quadruple vaccine had completed subsidies in most provinces, and Wantai Biotech's bivalent HPV vaccine release led to rapid performance growth. Societe Generale Securities expects the vaccine release rate to continue to accelerate in 2021, bringing greater performance flexibility to related companies. As for the blood products sector, the performance of the blood products sector in the fourth quarter was impaired to a certain extent due to the 2020 H1 plasma collection volume declined due to health events, and it generally took half a year from plasma collection reaction to supply.
Judging from stock price performance, the pharmaceutical sector index rose 3.77% in the fourth quarter of 2020, and the sector's performance was weaker thanShanghai-Shenzhen 300 IndexThe 13.60% increase is at the middle and downstream level of the entire industry. Overall, since December, the first-tier leader Hakuba has increased far better than that of second-tier and third-tier companies, showing great differentiation. Among them, medical services saw the biggest increase, mainly because health insurance policies were under heavy pressure in the fourth quarter, and the market sought policy havens. As a “high performance+health insurance and immunization” sector, medical services became the most definitive sector in the sector. The increase in chemical pharmaceuticals was mainly concentrated in December. As the innovative drug negotiations came to an end, and the negotiation results were better than expected, leading chemical pharmaceuticals representative Hengrui Pharmaceutical reached a record high, which led to a rise in the sector. The performance of biological products is central, mainly due to fluctuations in the vaccine sector due to the release of overseas vaccine efficacy data. The poor performance of traditional Chinese medicine and APIs is mainly due to the fact that most companies in these two sectors belong to the traditional sector and do not meet the characteristics of “consumption upgrade+innovation” fund groups holding heavy stocks (with the exception of branded Chinese medicines). The commercial sector performed the worst in the fourth quarter. Pharmacies showed a clear recovery, mainly due to market concerns about the uncertain impact of Internet medical care on pharmacies. However, Societe Generale Securities believes that in the context of Internet medical care and new retail, the restructuring of online and offline customer flow is the general trend. In the short to medium term, pharmacy chains have a deep moat, and long-term logic is improving.
Sector investment strategies
Looking forward to the future, Societe Generale Securities anticipates greater structural opportunities in 2021. “Health insurance immunization+ high performance growth” are the two key words, especially in areas damaged by health incidents in the first half of 2020, such as prescription drugs sold on the hospital side, medical devices, some medical services, chemiluminescence in IVD, etc., which will have good year-on-year growth in the first half of 2021. It is recommended to focus on the “medical services+self-funded consumption”, “innovative drug industry chain”, “medical devices”, “vaccines”, and “blood products” sectors.
(1) Medical services+self-funded consumption
The consumer medicine sector is the health insurance and immunization sector, and most varieties of 2020H1 were negatively affected by health events. The high performance growth in 2021 was determined. It can be determined that the layout can be seen as a part of leading racetrack companies that will be impacted by phased customer health events over the long term, including Aier Ophthalmology, Jinyu Medicine, and General Healthcare in medical services; leading pharmacy companies, Yifeng Pharmacy, Dashenlin, Yixintang, and ordinary people; Pien Ziyao, Yunnan Baiyao, and Tongrentang in branded consumer products. As health events calm down, consumption upgrading will continue to be a major trend in the pharmaceutical industry, and leading companies will continue to benefit from mergers and acquisitions in the industry and increased brand concentration. In self-funded medical treatment, pay attention to varieties not covered by medical insurance, such as Wowu Biology, Ed Biotech, Changchun Hi-Tech, etc.
(2) Innovative drugs and industrial chain
Innovative drug “water sellers” — Although many of these companies were affected by health incidents in 2020Q1, their long-term development trend has not changed, and there is a clear trend of acceleration in performance. It is recommended to focus on the market capitalization leaders (such as Pharmaceuticals, Tiger Pharmaceuticals, and Pharmaceutical Biotech) and companies with outstanding performance in segmented racing tracks (such as Gloria Ying, Kanglong Chemical, Pharmaceutical Stone Technology, and Ed Biotech).
Big Pharma, which has systemic advantages in R&D, market access, sales, etc. — Hengrui Pharmaceutical, China Biopharmaceuticals, Hanson Pharmaceuticals, etc., is gradually showing advantages in the entire industry chain, widening the gap with subsequent companies. This type of company will still be an investor's bottom position type allocation type. Emerging biotech companies - Some companies with BIC and FIC potential, such as Cinda Biotech, Junshi Biotech, Nuochengjianhua, Kangfang Biotech, Corning Jerry Pharmaceuticals, and Borui Pharmaceuticals.
(3) Medical devices on high-growth tracks
The current policy environment in this field is similar to that of pharmaceuticals a few years ago (collection+encouragement of innovation+import substitution), and most optional surgeries will be affected in 2020H1. The performance of these companies will significantly accelerate when switching to 2021. In the longer term, a new generation of independent innovation/import substitution medical device companies will face opportunities to reinvent the valuation system (similar to the previous innovative drug pipeline valuation) and accelerate growth. Looking at segments, cardiovascular stents, monitors, etc. have been imported and replaced, and leading companies such as Lepu Healthcare, Minimally Invasive Healthcare, and Mindray Healthcare have also sprung up. Sectors such as colorimetry, chemiluminescence, endoscopic consumables, or minimally invasive consumables, orthopedic consumables, and cardiovascular consumables are currently being gradually imported and replaced after technology is comparable to imported products. It is an important segment for the birth of future bull stocks. Related companies include Mindray Healthcare, Antu Biotech, and New Industries; Nanwei Medicine for endoscopic consumables; Sanyou Healthcare for orthopedic consumables; Qiming Medical and Peijia Healthcare in the TAVR field; minimally invasive medicine, cardiac care, and Huitai Healthcare in the fields of aorta, peripheral consumables, and electrophysiology.
(4) Vaccines for high-growth racetracks
After the introduction of the Vaccine Administration Law in 19, the industry ushered in an inflection point. Domestic vaccines ushered in a product launch cycle. Demand exploded due to increased public health awareness in 2020, and industry barriers increased, and vaccines are expected to usher in a “sharp rise in volume and price”. It is recommended to pay attention to Changchun Hi-Tech, Kangtai Biology, Hualan Biology, Cansino Biology, and Zhifei Biology. You can also follow the newly listed companies Wantai Biotech and Kanghua Biotech.
(5) Blood products
Based on the present, the tight supply of blood products in China is mainly affected by the 2020H1 health incident. Since it generally takes half a year from pulp collection to reaction to supply, supply in the third quarter was affected by the decline in pulp collection in the first half of the year. In terms of categories, due to the impact of the 2020H1 pulp collection, the overall supply of domestic blood albumin is currently slightly tight. From a 2021 perspective, foreign-funded imported blood products companies were affected by global health events in 2020, and overall pulp collection was affected (CSL's annual pulp collection as of June 2020 decreased by 5% compared to the previous year). In the short term, Societe Generale Securities anticipates that the supply of imported albumin will be affected to a certain extent in the first half of 2021, so domestic albumin will fill the gap caused by imported albumin, and the price of domestic human blood albumin is expected to rise as supply tightens, so there is a possibility that the volume and price of albumin will rise sharply in 2021. In the long run, the per capita consumption of various blood products in China is below the global level. With the deepening of future academic promotion and the deepening of doctors' and patients' understanding of the products, China's blood products industry will further develop, and the blood products industry will have long-term investment value. It is recommended to pay attention to Tiantan Biology, Hualan Biology, etc.
