Can pharmaceutical and biological industry continue to thrive?

On the whole, more than half of the companies in China have achieved a year-on-year increase in net profit attributable to their parent companies, and about 15 pharmaceutical companies have exceeded expectations. It can be seen that the overall prosperity of the pharmaceutical and biological industry is still relatively high. Then, in the third quarter, can the high capital of the pharmaceutical and biological industry continue?

Pharmaceutical and biological industry

15 pharmaceutical companies exceeded expectations in the first half of the year

As of now, A-share companies have basically disclosed their 2022 semi-annual reports. Among them, more than 140 companies’ net profit in the first half of the year exceeded the upper limit of the previous performance forecast.

From the perspective of their industries, these 100 outstanding companies are mainly concentrated in pharmaceuticals, basic chemicals, computers and mechanical equipment, electronics, new energy vehicles and other industries.

According to industry statistics, in the pharmaceutical industry, at least 15 pharmaceutical companies have exceeded expectations.

Among them, the traditional Chinese medicine company Yiling Pharmaceutical achieved net profit attributable to the parent. It deducted non-net profit of 564 million yuan and 561 million yuan respectively in the first half of the year, with a year-on-year growth rate of 94.96% and 114.37%. In the field of in vitro diagnostics, Dean Diagnostics achieved net profit attributable to the parent company and net profit attributable to the parent company after deducting non-recurring gains and losses were 1.880 billion yuan and 1.879 billion yuan respectively, with an increase of 158.54% and 196.22% over the same period last year.

In addition, a number of CXO companies whose performance exceeded market expectations in the first half of the year, such as Wisdom Medicine, Zhaoyan New Drug, WuXi AppTec, etc. In the year’s first half, Wisdom Medicine achieved a net profit of 957 million yuan, a year-on-year increase of 18,518.34%. In the year’s first half, Zhaoyan New Drug achieved a net profit of 371 million yuan attributable to the parent, a year-on-year increase of 141.4%. In the first half of the year, WuXi AppTec achieved an operating income of 17.756 billion yuan, a year-on-year increase of 68.5%, and a record high growth rate; net profit attributable to the parent also achieved a year-on-year increase of 73.3%, a relatively bright performance.

Can the industry boom pattern continue?

Among the A-share pharmaceutical and biological companies that have disclosed their semi-annual reports in the first half of the year, more than half of the net profit attributable to the parent company achieved a year-on-year increase, which shows that the overall prosperity of the industry is still relatively high. So, in the third quarter, can the high prosperity pattern of the pharmaceutical and biological industry continue?

Judging from the pharmaceutical segments that performed well in the first half of the year, they were mainly concentrated in the medical devices, traditional Chinese medicine and CXO sectors.

Since the beginning of this year, a number of policy innovations, including the seventh batch of centralized procurement of drugs, centralized procurement of high-value medical consumables, and medical insurance cost control, have been promoted, releasing a signal to encourage and support the rapid development of the innovative pharmaceutical device industry.

In the traditional Chinese medicine industry, the industry policy dividends are even more constant, and the entire industry is entering a golden period of rapid development. Some industry insiders pointed out that in the future, the Chinese medicine industry is expected to usher in an upward turning point with the support of policies and medical insurance.

It is expected in the industry that pharmaceutical innovation will become the main logic of the development of the entire industry. Under this background, CXO companies will also benefit for a long time, and leading companies may have high growth potential.

Ping An Securities believes that it is possible to pay attention to the sectors where the marginal improvement is in the upward trend. With the control of public health incidents, the performance of the pharmaceutical industry in the third quarter is expected to achieve accelerated growth. In the medium and long term, focus on the sectors that are basically upward in the post-epidemic period. It is recommended to focus on sub-sectors such as medical services, pharmaceutical business, innovative industry chain, and CXO.

Some brokerages also said that the pharmaceutical sector has cost-effectiveness and good fundamentals. The current low valuation is mainly affected by the centralized procurement policy, the epidemic situation, and medical insurance control fees. However, from the perspective of industry valuation and profits, the pharmaceutical sector belongs to the left-side layout. At this stage, there is still a bottom line down, and we can still look forward to it. The long-term development space is worthy of attention.

Disclaimer: Under no circumstances does the information or opinions expressed in this article constitute investment advice to anyone.

Source: https://mp.weixin.qq.com/s/5F4tdAtv9n56h4-cmqn5jg

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