The Zhitong Finance App learned that Guoxin Securities released a research report saying that the pharmaceutical industry is currently in the midst of low growth, low profitability, undervaluation, and low transaction attention, and is entering a major layout range at an upward inflection point in the medium to long term. The bank expects a good increase in in-hospital diagnosis and treatment volume in January compared to January '23 (the epidemic has just been liberalized plus Spring Festival factors), and the number of in-hospital treatments in February is expected to increase slightly compared to February '23 (Spring Festival factors). Since March is the peak season for diagnosis and treatment, the bank expects departments related to in-hospital diagnosis and treatment, especially those with strong immediate needs, such as cardiovascular, oncology, blood purification, and infection, which are expected to take the lead in breaking out of the short-term impact of industry rectification to achieve sequential acceleration of performance.

The report mentioned that the policy side's support for innovative drugs and innovative devices is clearly oriented. Innovative drugs are expected to distinguish whether they are high-quality innovations from the three aspects of pharmacy, clinical value, and evidence-based evidence, and provide policy support for highly innovative products in terms of pricing and networking. The bank expects that the review and approval stage for innovative drugs is also expected to accelerate, homogenization competition is expected to gradually ease, and it is optimistic about the commercialization volume of large domestic single products in the country. Also, on March 13, the “Action Plan to Promote Large-scale Equipment Renewal and Consumer Goods Trade-in” issued by the State Council was officially released. The plan states that support for innovation should be strengthened. As domestic enterprises experience many years of technology accumulation, innovative products are constantly emerging, and the technical content of products continues to improve, leading enterprises in the segment have typical “new productivity” characteristics. The R&D direction of some companies closely follows cutting-edge technologies, such as generative artificial intelligence, brain-computer interfaces, etc., which deserve the continued attention of investors.

The bank believes that the pharmaceutical industry currently has low growth, low profitability, low valuation, and low transaction attention, and is entering a major layout range at an upward inflection point in the medium to long term. It is recommended that active investors lay out two types of companies: the first category is innovative drug and innovative medical device companies. Since innovative drugs and innovative devices are in the early stages of the product life cycle, have low penetration rates, strong pricing power, and are products that are strongly supported by domestic medical insurance/commercial insurance payers, etc., such enterprises are the best growing assets in the pharmaceutical industry; the second category is companies with international capabilities and potential. Domestic pharmaceutical and medical device companies are expected to spawn more large-scale pharmaceutical companies in the next 5-10 years. Steady investors can deploy products that can meet the needs of C-side home care and have self-funded attributes in the context of Yinfa's economy, such as rehabilitation and pension, traditional Chinese medicine, and orthopedics and IVD industries that are not affected by collection.

Looking at the short-term Q1 dimension, the bank expects a good increase in in-hospital diagnosis and treatment volume in January compared to January '23 (the epidemic has just been liberalized, combined with Spring Festival factors), and the number of in-hospital treatments in February is expected to increase slightly compared to February '23 (Spring Festival factor). Since March is the peak season, the bank expects departments related to in-hospital diagnosis and treatment, especially those with strong immediate needs, such as cardiovascular, cerebrovascular, oncology, blood purification, infection, etc. are expected to take the lead in breaking out of the short-term impact of industry rectification to achieve sequential acceleration in performance.

The bank made a forward-looking forecast on the 2024Q1 performance of 51 companies in the A-share pharmaceutical and biological industry: 28 companies are expected to grow by 10% or more in 24Q1, of which 13 have grown by more than 20%. Investors are advised to actively pay attention to listed companies whose Q1 performance is resilient and can better reflect the growth trend throughout the year.

Guoxin Securities March Investment Portfolio: A Shares: Mindray Healthcare (300760.SZ), Zhifei Biotech (300122.SZ), Zhixiang Jintai-U (688443.SH), Maiwei Bio-U (688062.SH), Jinyu Medical (603882.SH), Chunli Medical (), Aohua Endoscopy (US), Aide Biotech (300685.SZ), Zhende Healthcare (), Xishan Technology (Insurance); H Shares: Collumbotai Biotech (B) 688236.SH 688212.SH 603301.SH 688576.SH 06990), Kangfang Biology (09926), Conoa-B (02162), Elken Healthcare (01789).

Risk warning: risk of R&D failure; risk of commercialization falling short of expectations; geopolitical risk; risk of policies exceeding expectations