this week's market review: the sector rose

this week's pharmaceutical and biological index rose 1.87 percent, outperforming the CSI 300 index by 1.81 percentage points, outperforming the Shanghai Composite Index by 1.61 percentage points, and ranking 8th in the industry. On November 10 (this Friday), PE(TTM, excluding negative values) in the pharmaceutical and biological industry was 27X, which is between "mean-1X standard deviation" and "mean-2X standard deviation" since 2012, up 0.4 from PE on November 3 and 7 units lower than the mean (34X) since 2012. This week, 12 of the 13 pharmaceutical III sub-sectors rose and 1 sub-sector fell. Among them, offline pharmacies were the biggest gainers, up 6.39 per cent, while hospitals were the biggest decliners, down 1.57 per cent. The sub-sector with the highest valuation on November 10 (this Friday) is hospitals, with PE(TTM) of 58X.

valuation provides a margin of safety, health insurance negotiations provide marginal variables

this week pharmaceuticals continued to outperform the CSI 300 index. In the subdivision sector, pharmacies, circulation, IVD and CXO led the gains, while the only hospital segment fell. Individual stocks rose top10, pharmacies and IVD led the rise significantly, pharmacies as a whole pulled back more bottom positions, and the market expected marginal changes such as prescription circulation and medical insurance coordination to fall one after another. The top10 decline in individual stocks was mainly due to the large increase in the diet drug industry chain. The diet industry chain continued to plummet this week, especially Lilly and Tilopeptide FDA's approved diet indications continued. The news side believed that short-term catalysis had been realized.

in hong kong stocks, HSCIH rose 1.02 percent on a weekly basis, with innovative drug targets dominating.

the pharmaceutical index rebounded for two consecutive weeks. Even so, the trend of pharmaceutical biology (Shenwan) year-to-date is still at the low point in September 2022, and the valuation is also at the low point in the past year.

we believe that the policy-related bad news has come to an end, the continuous explosion of large pharmaceutical products shows the investment value of pharmaceutical products, the continued negotiation of medical insurance at the end of the year and the renewal of the standard superposition of the basic drug catalogue. the fund's position in medicine has increased slightly compared with the previous period, but it is still at a low level compared with the history. at this time, the pharmaceutical sector needs to increase in allocation, platform-based, research and development capabilities of the company will be across the cycle, the proposed allocation of ideas include large market value PEG low leading companies, individual stock segmentation leading toughness of the company (especially already commercialized), the company has been at a low level but there are changes in the small market value of the company.

in addition, the number of operations in the fourth quarter of 2022 fell sharply, resulting in some surgery-related pharmaceutical companies with a low performance base, can pay more attention, such as orthopedics, anesthesia and other related categories of companies.

individual stocks are suggested to be allocated in November: Aier Ophthalmology, Mindray Medical, Yahuilong, Junshi Biology, Innot, Haitai Xinguang, Jianhui Information, Green Leaf Pharmaceuticals and Zhifei Biology.

investment ideas suggested:

(1) industry market value leading configuration (liquidity + configuration): medicine, machinery, products leading, services, such as Zhifei Bio, Mindray Medical, Aier Ophthalmology, etc., it is recommended to pay attention to Hengrui Pharmaceuticals, Pharmaceutical Mingkang.

(2) Leading companies in subdivided fields: Yahuilong (luminous catch-up + self-exemption leading + fast growth) + Junshi Biology (US FDA nasopharyngeal carcinoma is about to be approved + management improvement) + Green Leaf Pharmaceuticals (CNS Leading + Seaing) + Tebao Biology (exclusive to hepatitis B interferon), Aidi Pharmaceuticals (HIV Monolithic), Xingqi Eye Medicine (Atropine), Inote Compound (exclusive to Hua, respiratory poct detection subdivision tap).

(3) imitation stabilization innovation change company: Xinlitai (collection of short-term and multiple products listed) and Baicheng Pharmaceuticals (generic CRO), it is recommended to pay attention to Kangzhe Pharmaceuticals and Yifan Pharmaceuticals.

(4) is expected to contribute large single products: Innaute (respiratory triple five-joint nine-joint inspection products), 100 grams (on behalf of the large single product to drive performance growth month-on-month), Orin (the world's exclusive Staphylococcus aureus three-phase progress is good), it is recommended to pay attention to Korenbotai, Zhixiang Jintai, Zejing Pharmaceuticals.

(5) traditional Chinese medicine: yiling and kangyuan (leading prescription drug of traditional Chinese medicine) + Guizhou sanli (rich products and strong sales ability) + guangyuyuan (old brand) + darentang (old brand) + tongrentang (old brand) + gushengtang (scarce target of traditional Chinese medicine chain), and state-owned enterprises of traditional Chinese medicine (kunyao group, conbei, taiji group and CR sanjiu).

(6) Pharmacy (undervaluation): Yixintang, Yifeng Pharmacy, Dashenlin, Jianjia.

(7) Medical devices: rehabilitation + electrophysiology + medical supply chain + orthopedics, etc., Xiangyu Medical, Mai Lande, minimally invasive electrophysiology, health information, etc., it is recommended to pay attention to Weigao orthopedics.

(8) Medical services: Aier Ophthalmology, International Medicine (strong demand for in-hospital diagnosis and treatment in the winter peak season), Huaxia Ophthalmology, Haigia, Ryall Group, Meunian Health.

(9) Weight loss drug industry chain continues to focus, such as: Haixiang Pharmaceutical, East China Medicine, Cinda Bio, Shengnuo Bio, etc.

Hua 'an Innovative Drug Week Viewpoint: The new drug industry has received good news and continued to find potential single products. Zhou du resumed trading: this week's drug sector saw a slight correction after the general rise, with Hong Kong stocks mainly falling back on Friday. As overseas MNC announced Q3 results one after another, it continued to pay attention to potential areas and domestic leading single products. This week, the drug Ming Juno rose more than 30%, the cell therapy industry recently ushered in new life, reindeer biological BCMA CAR-T began to prescribe, the source of biological CD19 CAR-T approved for listing, financing activity has also resumed. A- share science and technology board pharmaceutical companies, Zejing Pharmaceuticals rose more than 9% this week, the company's thrombin, JAK inhibitor Jack Tini and other in the NDA stage approved, is expected to become a large single product rapid contribution to revenue. In addition, Baekje Shenzhou Company's Q3 performance achieved its first profit in a single quarter, with revenue of US $0.781 billion (+101.6%), product revenue of US $0.595 billion (+70.3%), global sales of Zeboutinib 23Q3 of US $0.358 billion (yoy +130%,qoq +16%), cumulative sales of US $0.877 billion in the first three quarters, and 1 billion sales are expected for the whole year.

the main force of innovative pharmaceutical enterprises (the first generation of Baiji, Rongchang, Xinda, Junshi, etc.; The second generation of Kangfang, Alex, Shanghai Yizhong, Ze Jing Pharmaceutical) has entered the stage of product sales volume, the overall industry has entered the fast lane of standardized development, and biotech has entered the stage of profit. From the past pursuit of new targets, differentiated indications of the R & D arms race into the commercialization capacity competition stage, whether a good product can really be released, become the ultimate yardstick to measure a product. The clinical demand triggered by aging catalyzes the long-term beta of the industry, innovative drugs and other categories with the ability to solve diseases are expected to benefit under the new industry rules, and mature pharmaceutical companies will focus more on expanding their excellent product pipelines. Only products with innovative clinical value are expected to go to sea, expecting more valuable drugs to improve accessibility and benefit more patients.

good products + good sales + overall operation ability: observing the market reaction in the past, we believe that the commercialization ability is the key to make the drug truly produce multi-party benefits for patients and enterprises. The industry is in the capital side of the tightening, research and development difficulty to improve the integration period, with a comprehensive overall operation capacity of enterprises more likely to brave the tide. At this time, we choose to hold a large potential single product, with the ability to go to sea, with the track or adaptation of the exclusive advantage of the individual stock target.

focus on target:

1) medicine β has inflection point of individual stock change: junshi biology (α promotion + PD-1 going to sea), green leaf medicine (financial improvement + new product release), yifan medicine (multiple new product increments + F627 going to sea);

2) this year's low base will increase greatly next year: Rongchang biology (RC18 adaptation expansion, 23-year low base), Xinlitai (next year's medical insurance increment + JK07 to go to sea, 23-year low base);3) Leading companies in Junior College fields: Tebao Biology (exclusive for hepatitis B interferon), Aidi Pharmaceutical (HIV compound single-chip medical insurance negotiation), Xingqi Eye Medicine (atropine), Beida Pharmaceutical (lung cancer EGFR);

4) innovative pharmaceutical companies with large single products: zejing Pharmaceuticals (human thrombin, Jacktini), Korenbotai (SKB264 and other ADC), Zhixiang Jintai (dog resistance, broken resistance), Arix (Vormeitinib first-line medical insurance);

5) imitation stabilization innovation change company: kelun pharmaceutical (infusion gross profit + botai innovation), kangzhe pharmaceutical (collection of new products such as IL-23 + luke ointment, etc.), xinlitai (collection of profit and loss + enaro medical insurance + JK07 to sea);

6) Long-term attention to offshore/platform pharmaceutical enterprises: Baiji Shenzhou, Kelun Pharmaceutical, Junshi Biology, Cinda Biology and Hengrui Medicine.

performance of individual stocks this week: nearly 80% of a shares rose

of 491 a-share pharmaceutical and biological stocks this week, 379 rose, accounting for 77.19.

The top 10 pharmaceutical stocks this week are: hot Scene Biology (+32.44%), Nuowezan (+23.04%), Runda Medical (+21.94%), Weikang Pharmaceutical (+17.21%), Innovative Medical (+16%), Yixintang (+14.04%), Mai Lan De (+13.76%), Beilu Pharmaceutical (+12.52%), Yuekang Pharmaceutical (+12.31%), Yabao Pharmaceutical (+11.91%).

this week's top 10 decline in pharmaceutical stocks are: * ST Jiyao (-13.53%), Sialon Pharmaceuticals (-11.99%), Hanyu Pharmaceuticals (-11.45%), Nuotai Biology (-10.81%), Haite Biology (-8.25%), Heisen Pharmaceuticals (-8.15%), Borui Pharmaceuticals (-6.22%), Puli Pharmaceuticals (-6.16%), Zhenbao Island (-6.02%), Forray shares (-5.80%).

44 of the 97 stocks in hong kong rose this week, accounting for 45.36 per cent.

this week's new report

the company commented on the health of the United States (002044): "the overall operation in the first three quarters is good, and the long-term growth space is optimistic"; Summary of the third quarter report of the Chinese medicine sector 2023: "Quarterly fluctuations do not change the boom, and expect opportunities for policy and performance resonance"; The company commented on Mindray Medical (300760): "Performance Meirui" Performance Meirui. The company commented on Huada Zhizao (688114): "Gene sequencing business maintains rapid growth and overseas markets open"; The company commented on Kaili Medical (300633): "The third quarter results are under short-term pressure, and the endoscope sector still shows resilience"; The company commented on Hua Ao Hua Endoscope (688212): "AQ-300 volume can be expected, equity incentive shows long-term confidence"; The company commented on Haitai Xinguang (688677): "The company's low or low performance, expected 2023Q4 Ring-on-Ring Improvement"; Company Comments: Adoption of Shares (301122):23Q3 Continues to Improve Ring-on-Ring, and the Company Returns to Growth Trend; Summary of pharmaceutical industry performance in the third quarter of 2023: "External interference gradually calmed down, performance gradually reflects the steady operation of the company's main business"; Summary and Prospect of the 3rd Quarterly Report of Medical Device Industry in 2023: "Optimizing Reasonable Valuation + Leading Target with Improvement Expectation + Improvement Expectation + Large Decreateness + Large Decline"; company review Coren Pharmaceuticals (002422.SZ): "23Q3 infusion industry."The company commented on Antu Biology (603658): "Steady Growth in Luminescence Business, Short-term Pressure in Molecular Business"; The company commented on Beida Pharmaceutical (300558.SZ): "23Q3 Profit Exceeds Expectations Again, EGFR Drug Demand Continues"; Company Comments on Huitai Medical (688617): "Performance Continues High Growth, Profitability of Cost Reduction and Control Fee Outstanding"; Company Comments on Microelectrophysiology (688351): "Domestic product collection volume, overseas market expansion smoothly", the company's depth of Zexuan Pharmaceuticals (688266): "self-immune tumor double-drive innovative drug new star, commercialization into the intensive acceleration period", the company commented on Bender Pharmaceuticals (688073): "performance short-term pressure, optimistic about the continued strength of overseas markets."

risk tips

policy risk, competitive risk, abnormal stock price volatility risk.