Zhongtai Securities said that at present, the overall market is still at a relative bottom. After experiencing a long-term correction, the pharmaceutical sector is also at multiple bottoms in terms of fundamentals, policies, and capital, and is firmly optimistic about the pharmaceutical sector market throughout the year.
The Zhitong Finance App learned that Zhongtai Securities released a research report saying that due to the relatively lackluster Q1 performance, the overall performance of the pharmaceutical sector was weak in March, but the internal sub-sector was divided, and individual stocks related to hot catalysis such as AI, GLP-1, and NASH showed performance. Currently, the overall market is still at a relative bottom. After experiencing a long-term correction, the pharmaceutical sector is also at multiple bottoms in terms of fundamentals, policies, and funding, and is firmly optimistic about the pharmaceutical sector market throughout the year. The Q1 results are about to be implemented. Gradually focus on the pharmaceutical sector and individual stocks that have improved Q2 performance, and actively grasp layout strategies that balance defense and offense. Under weak macroeconomic expectations, defensive assets, including high dividends, are actively deployed, while at the same time allocating offensive targets for real growth.
Key recommendations for April: Donga Ejiao (000423.SZ), Jichuan Pharmaceutical (600566.SH), Baike Biotech (688276.SH), Sansheng Guojian (688336.SH), Federal Pharmaceuticals (03933), Jiuqiang Biotech (300406.SZ), Jiudian Pharmaceuticals (300705.SZ), Nootai Biotech (), Baicheng Pharmaceuticals (301096.SZ), Sitaili (). 688076.SH 603520.SH
The main recommendation was an average drop of 0.75% in March, outperforming the pharmaceutical industry by 1.51%. Among them, Baicheng Pharmaceutical (+11.19%), Jiudian Pharmaceuticals (+10.64%), Donga Ejiao (+5.90%), Federal Pharmaceuticals (+5.41%), and Nootech (+4.49%) performed well.
The main views of Zhongtai Securities are as follows:
March review: The overall sector is weak, and the thematic opportunities are bright; optimistic about improving fundamentals from season to season, and the bottom layout is recommended
The pharmaceutical and biological sector fell 2.27% in March. The Shanghai and Shenzhen 300 rose 0.61% during the same period, and the pharmaceutical sector outperformed the Shanghai and Shenzhen 300 by about 2.87%, ranking 28th among the 31 sub-industries. Among them, chemical pharmaceuticals, traditional Chinese medicine, and pharmaceutical businesses increased by 1.58%, 1.09%, and 0.53% respectively, while medical services, biological products, and medical devices decreased by 8.00%, 5.79%, and 3.74%, respectively. Zhongtai Securities pointed out that due to the relatively lackluster performance in Q1, the overall performance of the pharmaceutical sector was weak in March, but the internal sub-sector was divided, and individual stocks related to hot catalysis such as AI, GLP-1, and NASH showed performance. Currently, the overall market is still at a relative bottom. After experiencing a long-term correction, the pharmaceutical sector is also at multiple bottoms in terms of fundamentals, policies, and funding, and is firmly optimistic about the pharmaceutical sector market throughout the year.
April layout idea: Q1 results are about to be implemented, gradually focus on sectors and individual stocks with improved Q2 performance
In April, we will enter a period of intensive disclosure of the first quarterly annual report. At the same time, we will gradually focus on Q2 performance trends and hot track catalysis. The disclosure of quarterly report data and the reading of qualitative data for April will catalyze high-quality individual stocks that exceed expectations. At the same time, it will also look ahead to Q2 to seize good layout opportunities. Judging from the 2024 Q1 outlook, we focus on recommending two directions:
1) Differentiated product volume: including some innovative drugs, innovative devices, vaccines, specialty generic drugs, branded Chinese medicines, etc., such as Rongchang Biotech, Jiudian Pharmaceuticals (30-40%, 24Q1 preview, same below), Baike Biotech (572-763%), Donga Ejiao (35-40%), etc.
(2) Industry stage boom: including Nuotai Biotech (40-50%) and Shengnuo Biotech in the GLP-1 diet medicine industry chain, as well as generic CRO Baicheng Pharmaceuticals (30-40%) and Sunshine Nuohe (30-40%). Looking at the current qualitative trend of forward-looking Q2, the Q1 performance sectors and individual stocks highlighted earlier are expected to continue, including differentiated product volumes and industry boom tracks; at the same time, performance inflection points or improvements are worth watching due to factors such as base and industrial cycle, including low-base pharmacies, some traditional Chinese medicines, some medical services, etc., as well as low-value consumables, specialty pharmaceuticals, CRO/CDMO, etc., which are expected to inflate at the bottom of the fundamentals.
Offense:
1) Innovative drugs: The “super decline” sector that was adjusted earlier, and is gradually entering a quarterly reporting window for the next year. At the same time, the disclosure of annual reports by overseas multinational pharmaceutical companies is expected to bring about a domestic reflection market; optimistic about Rongchang Biotech, Alice, Kangfang Biology, Shenzhou Cell, Lepu Biotech, China Biopharmaceuticals, etc.
(2) GLP-1 peptide industry chain: The current rapid dosage of the major peptide drugs simeglutide and telpopeptide, combined with the continuous development of indications such as heart failure, chronic kidney disease, and NASH, and the continuous development of novel multi-target peptide weight loss drugs, it is expected that the GLP-1 polypeptide industry chain is expected to usher in a round of explosions. The focus is on Nootai Biotech, Shengnuo Biotech, Hanyu Pharmaceutical, Orient, Minovar, etc.
DEFENSE:
Continuously grasp targets related to high dividends, stable cash flow, and state-owned enterprise reform. In the current market environment, cash is king, relax growth requirements, and actively seek targets related to stable cash flow, high dividends in undervaluation, and stable and low valuation of the main business. Along with the State Council's recent proposal to further advance the “Improving the Quality of Listed Companies Controlled by Central Enterprises”, it is expected that 2024 will see a continuous increase in the level of dividends. It is recommended to continue to lay out high-quality state-owned enterprises in the pharmaceutical business, traditional Chinese medicine, blood products, and medical device sectors, and be optimistic about Donga Ejiao, Jichuan Pharmaceutical, Jiangzhong Pharmaceutical, and Jiuqiang Biotech.
Industry hot topics focus:
(1) Novo Nordisk announced the main results of its GLP-1 series tests. (2) The first NASH treatment was approved by the FDA. (3) Nvidia's 2024 GPU Technology Conference opens, and life science/healthcare related conferences have become a hot topic.
Market News:
Analyzing the pharmaceutical sector from the beginning of 2024 to the present, the yield of the pharmaceutical sector was -12.1%, the absolute yield of the Shanghai and Shenzhen 300 during the same period was 3.1%, and the pharmaceutical sector outperformed the Shanghai and Shenzhen 300 by about 15.2%. The pharmaceutical and biological sector fell 2.27% in March 2024. The Shanghai and Shenzhen 300 rose 0.61% during the same period, and the pharmaceutical sector outperformed the Shanghai and Shenzhen 300 by about 2.87%, ranking 28th among the 31 sub-industries. Among them, chemical pharmaceuticals, traditional Chinese medicine, and pharmaceutical businesses increased by 1.58%, 1.09%, and 0.53% respectively, while medical services, biological products, and medical devices decreased by 8.00%, 5.79%, and 3.74% respectively.
Based on the 2024 profit forecast valuation, the current valuation of the pharmaceutical sector is 19.4 times PE, the price-earnings ratio of all A shares (excluding the financial sector) is about 14.8 times, and the premium rate of the pharmaceutical sector compared to all A shares (excluding the financial sector) is 30.7%. Based on the TTM valuation method, the current valuation of the pharmaceutical sector is 25.0 times PE, which is lower than the historical average (35.7 times PE), and the premium rate compared to all A-shares (excluding the financial sector) is 32.3%.
Risk warning:
There may be a risk of policy disturbances, drug quality issues, and publicly available materials used in research reports that information will be delayed or not updated in a timely manner.