at the beginning of may, the overall rise of pharmaceutical and chemical industry, first the concept of synthetic biology suddenly emerged, then the medical equipment relay rose sharply, followed by stem cells and pharmaceutical commercial sectors, attracting a steady stream of short-term funds to intervene. Statistics show that the pharmaceutical and biological index has been positive for several consecutive days, with a cumulative increase of more than 6% since April 24.

Some industry insiders pointed out that in the first quarter of 2024, public funds accounted for 10.54 of the investment in the pharmaceutical and biological industry. This is also since the third quarter of 2022 hit a stage low, the allocation of public funds to pharmaceutical stocks has entered a new round of rising period. With the marginal reduction of the impact of medical anti-corruption, the market has been further standardized, the growth rate of net profit of the pharmaceutical industry in the first quarter of 2024 has also rebounded year-on-year, and the profitability of the sector has stabilized. Therefore, it is suggested that investors should pay attention to the segments with high prosperity and stable performance in the pharmaceutical industry, such as synthetic biology, traditional Chinese medicine and medical equipment.

01

Synthetic biology : has become the hottest topic in the market

"Synthetic biology" has recently become one of the most popular topics in the market. Many concept stocks in the secondary market have fluctuated significantly, and the overall performance is very eye-catching. It is reported that biological manufacturing (synthetic biology) is a brand-new "creation" technology, which integrates biology, chemistry, engineering and other technologies. It uses renewable biomass as raw materials and organisms as production media. Using cheap raw materials, using bacteria, cells, and enzymes as manufacturing plants, large-scale fermentation to obtain target products, which are clean, efficient, and renewable. Synthetic biology is a sunrise industry that emerged at the beginning of this century. It can realize the transformation and even creation of life systems. It is currently the most promising project for venture capital in the primary market. In addition, synthetic biology has rich application scenarios and great potential in the context of carbon neutrality. Basic research, technological progress and policy support are also accelerating its development.

CITIC Securities stated that the revenue and profit growth of the synthetic biology sector in the first quarter of 2023 and 2024 was bright, and the current industry valuation is significantly lower than the average valuation level of the past three years. In terms of fundamentals, new products and new production capacity of related companies are gradually landing, and future revenue and profits are expected to maintain a steady growth trend; in terms of valuation, with the subsequent heavy policy catalysis, the sector valuation level is expected to continue to repair. At present, the core competitiveness of bio-manufacturing companies lies in product development and landing capacity, optimistic about the success of the case, leading position, high-quality product reserves and downstream demand boom target.

Wang Qiangfeng, an analyst at Huaan Securities, pointed out that in the future, bio-manufacturing is expected to become the fourth industrial wave after the agricultural economy, industrial economy and digital economy, and is expected to open up a trillion-scale market space. In the context of the frequent landing of relevant policies, the industrialization of biological manufacturing is expected to speed up, it is recommended to pay attention to Kaisai biology, Huaheng biology, plum biology, Shengquan Group, Huaxi biology, Jiabiyou and other competitive listed companies.

Potential Stock Selection

Kaiser Bio (688065) Benefit from improved downstream demand

The company continues to increase product sales. Since the first quarter of 2024, the demand for long-chain dibasic acid has improved, the customer share of sebacic acid products has increased, the first quarter revenue increased by 24.76, the return of net profit increased by 99.96. Shanxi Securities pointed out that the company's forward-looking layout of hydrogen energy and air traffic applications, per ton of bio-based polyamide compared to petrochemical-based can reduce carbon emissions by more than 50%. At present, the downstream applications of bio-based polyamides include textiles and clothing and engineering plastics, and the thermoplastic composites developed by the company can be applied to new energy, transportation logistics and other fields. According to the company's disclosure, the global bio-based polyamide market is expected to reach 21.591 billion billion yuan by 2025. At present, the company has sold 100000 tons of bio-based polyamide and has a production capacity of 900000 tons under construction. In 2023, the company proposed to raise no more than 6.6 billion yuan, the introduction of China Merchants Group as an indirect shareholder of the fixed increase program, is expected to strongly promote the progress of bio-based polyamide industrialization.

Huaheng Bio (688639) further open space for growth

The company continues to increase R & D investment, introduce high-end R & D talents, improve the construction of the company's synthetic biological R & D platform, and is committed to building an international leading technology R & D center. In 2023, the company applied for 42 new invention patents and 9 new utility model patents. Haitong Securities pointed out that in 2023, the company will continue to promote its international development strategy, continue to upgrade the original marketing organization system, further enhance the company's overall product planning and product capabilities, and optimize customer regional sales management. In terms of new project construction, the company will push forward the construction of Chifeng base with an annual output of 50000 tons of bio-based succinic acid and raw materials for bio-based products and a construction project of bio-based 1,3-propylene glycol with an annual output of 50000 tons as planned. Qinhuangdao base will build a construction project with an annual output of 50000 tons of bio-based malic acid. All of the above projects can realize continuous mass production in 2024. The company's product technology will also expand from amino acids, vitamins, etc. to bio-based new material monomers, further opening up the company's business growth space.

Plum Blossom (600873) Profit is expected to grow steadily

the company began to lay out the field of synthetic biology as early as 2010. in 2023, the valine anaerobic fermentation process developed by the company in cooperation with scientific research institutions significantly improved the metabolic efficiency of microbial strains, and the production cost per ton of new glutamic acid strains independently developed decreased by nearly 100 yuan. Shen Wanhongyuan Securities pointed out that at present, the company's production capacity of lysine and monosodium glutamate has reached one million tons and threonine has reached 450000 tons respectively. The production capacity of other starch by-products, fertilizer products, colloidal polysaccharides and pharmaceutical products is in the forefront of the industry. From the industry situation, lysine, threonine industry shows the trend of head concentration, integration continues, it is expected that the next 2 years inefficient production capacity will gradually clear supply and demand improvement, the company as a head enterprise has a certain market control capacity. Superposition company deep plowing "amino acid plus" strategy, multi-product layout cycle flat, with the steady progress of the company's business, profit cycle fluctuations are expected to slow down, the overall profit volume will be a new level of steady growth, into a new stage of development.

Jiabiyou (688089) Eight technology platforms will exert force

as of March 2024, the company has established eight major technology platforms, including bioinformatics and biocomputing platform, gene synthesis and gene editing platform, cell factory casting platform, intelligent fermentation and metabolic fine control platform, efficient intelligent separation and refining platform, product application technology development platform, high-throughput analysis and testing platform and pilot transformation platform of biotechnology achievements. The main construction project of Wuhan synthetic biology innovation center, which was built by the company and Wuhan Industrial Innovation and Development Research Institute and other resources, has been fully capped in November 2023. As the leader of synthetic biology industry in central China, the center will build a national incubator of synthetic biology and provide an innovation platform for the industry. Tianfeng Securities pointed out that the company's fundamentals have now stabilized, and the future development of synthetic biotechnology is expected. In 2024, with the conversion of the company's new powder production capacity and the steady development of the company's overseas market, the company's overall performance is expected to further improve. development.

02

traditional Chinese medicine : welcome configuration is better than

Although the growth base of the Chinese medicine industry is relatively high, the 2023 annual report data shows that there are still some outstanding Chinese medicine stocks that have performed better than market expectations, and the industry growth rate is expected to improve in the second half of this year. Some analysts believe that under the background of aging, Chinese medicine has healthy consumption attributes, and the degree of policy support and cultural recognition is constantly improving, superimposed on the innovation of Chinese medicine and the reform of Chinese medicine state-owned enterprises, the industry's medium-and long-term growth logic is clear.

from the industry level, Guosheng securities analyst Zhang Jinyang pointed out that the impact of the external environment of the pharmaceutical industry is gradually weakening, sales in hospitals have entered a normal stage, and the performance of traditional Chinese medicine enterprises has improved month on month. From the perspective of non-cold fever outside the hospital, in the weak consumption environment, the rigid demand attribute of traditional Chinese medicine appears. The performance of cold and fever companies also exceeded expectations at a high base. In addition, the performance growth of excellent Chinese medicine enterprises is stable, the product moat is wide, the dividend rate is high, and shows an upward trend. In the current macro environment, Zhang Jinyang believes that the overall development of the Chinese medicine industry to strengthen the robustness, both just need and healthy consumption attributes, in the aging trend, the long-term development of higher certainty. At the same time, Chinese medicine enterprises attach importance to investor returns, the proportion of dividends continues to rise, the overall defense value is higher.

Since the third quarter of 2023, due to the impact of the medical anti-corruption environment, the proportion of public funds allocated to the Chinese medicine sector has decreased. In the future, with the early high base digested, the growth rate of the Chinese medicine sector is expected to achieve quarter-on-quarter improvement, the current configuration of Chinese medicine is a good time. Zhu Guoguang, an analyst at Soochow Securities, suggested that investors pay attention to excellent listed Chinese medicine companies such as Zoli Pharmaceutical, Taiji Group, Kangyuan Pharmaceutical, Fangsheng Pharmaceutical, Jichuan Pharmaceutical and Darentang.

Potential Stock Selection

zoli pharmaceutical (300181) core product growth rate bright

The company's first quarter 2024 results exceeded market expectations, the core product Uling capsule growth rate bright. Southwest Securities pointed out that the company has three growth engines, the first is the Wuling series, the company will actively take advantage of the opportunities brought about by the bid to speed up hospital coverage and the number of departments, is expected to achieve price-for-volume. At the same time, we will promote the secondary development of the Wuling series, including the secondary development of Wuling capsules for Alzheimer's disease indications and the development of Wuling compound. The second is the Bailing series. The restrictions on medical insurance indications for Bailing tablets will be relaxed from January 2024, and the "Beijing-Tianjin-Hebei 3 + N" alliance and other regional collection will also bring opportunities. In addition, in December 2023, Tongfang Bailing capsule with the same name was approved for listing, and the development of heavy new products can be expected. The third is Chinese herbal pieces and granules. By the end of 2023, the company has completed 335 national standard and provincial standard records for Chinese medicine formula granules. With the increase in the number of granules filed, the Zhejiang market will be deepened and the other provincial markets will be actively explored. The granules will be ready for development in 2024.

Taiji Group (600129) Long-term growth space is promising

in the first quarter, the company's revenue fell 4.96 percent year-on-year, and its net profit was 0.247 billion billion yuan, up 5.05 percent from the same period last year. Judging from the performance of the first quarter, the growth rate of the company's core varieties slowed down under the high base of the same period last year, superimposed on some chemical products and commercial sectors, resulting in short-term pressure on the company's performance. It is expected that other varieties of traditional Chinese medicine will still achieve steady growth, and the overall performance is in line with the market's previous expectations. China Securities Securities pointed out that the company's high performance growth and continuous improvement in management in the past two years, the company's current valuation has fully reflected the short-term fluctuations in operations, and short-term operating fluctuations will not change the long-term improvement of the company's operations.Period. Looking forward to the whole year, with the company's industrial sector to strengthen category development and channel construction, the profitability of the commercial sector to further improve, overlay the company to develop the industrialization of Chinese herbal medicine resources, actively explore the second growth curve, optimistic about its long-term growth space.

fangsheng pharmaceutical (603998) abundant reserves of products under research

The company's revenue from the pharmaceutical and pharmaceutical industry in 2023 was 1.439 billion yuan, accounting for 88.35 percent, up 7.84 percent year-on-year, and the net interest rate of non-returning parents was 8.2 percent, up 2.26 percent year-on-year. Since the company went public, it has paid different proportions of cash dividends every year. So far, it has paid 13 dividends, with a total dividend of about 0.487 billion yuan. In 2023, the company's two dividends totaled 0.128 billion yuan, with a dividend ratio of 68.27. Guohai Securities pointed out that the company continued to promote the development of innovative Chinese medicine, in the research of product reserves, progress smoothly. Among them, the phase II clinical study of Zhilong Tongluo tablets is progressing smoothly, the Jianwei Qutong pills are undergoing phase III clinical trials, the Noritong granules are undergoing long-term toxicity tests, the clinical progress of the newly added adult applicable diseases of Xiaoer Jingxing Zhike granules is progressing smoothly, the Zhixue Xiaotong granules are undergoing pharmaceutical research, and the Yiqi Xiaoliu granules have been declared for clinical trials in April 2024.

Jichuan Pharmaceutical (600566) Profitability Continues to Improve

the company's performance continued to exceed market expectations, profitability significantly improved. In 2023, the company achieved operating income of 9.655 billion billion yuan, up 7.32 percent year-on-year, and net profit of 2.823 billion billion yuan, up 30.04 percent year-on-year. In 2023, the company's profitability improved significantly, with a net interest rate of 29.28 per cent, up 5.14 per cent year-on-year. In the first quarter of 2024, the company achieved operating income of 2.403 billion yuan, up 0.6 percent year-on-year, and net profit of 0.845 billion yuan, up 24.9 percent year-on-year. Societe Generale Securities pointed out that in 2023, the company reached four product introduction or cooperation agreements and successfully reached the 2022 performance evaluation target, including one polymerase acidic protein (PA) inhibitor ZX-7101A for the treatment or prevention of influenza, one traditional Chinese medicine directional drug penetration therapeutic instrument, and two medical device products for gynecology and ophthalmology respectively. Among them, the ZX-7101A listing application has been accepted by CDE, is expected to contribute to the company's future performance growth.

03

Medical Devices: Three Points to Watch

The Action Plan for Promoting Large-scale Equipment Renewal and Consumer Goods Trade-in issued by the State Council clearly states that by 2027, the scale of domestic equipment investment in industry, agriculture, construction, transportation, education, culture and tourism, medical care and other fields will increase by more than 25% compared with 2023, and the annual compound growth rate will reach at least 5.74. In the future, financial support for public hospital equipment procurement is expected to increase, and the demand for medical equipment bidding will gradually resume. Yuan Wei, an analyst at Guojin Securities, pointed out that the release of relevant policies will be conducive to the development of the medical equipment industry in the future, the enthusiasm of enterprises for innovation and research and development will be stimulated, the market capacity of medical equipment and the penetration rate of high-end products may be improved, and domestic medical equipment track head enterprises are expected to gain more market share by virtue of manufacturing cost reduction and product technology advantages.

Tianfeng Securities analyst Yang Song pointed out that in the institutional view, the medical industry has three major points in the future. The first is internationalization. Domestic medical leading enterprises have established a more mature sales system, to achieve the scale of overseas sales, and continue to expand. China is currently the world's second largest medical device market after the United States. With the development of medical talents and domestic medical industry devices, import substitution will be one of the important investment logics; the third is the increase in penetration. Compared with developed countries, the level of medical resource allocation in China is still far behind, and there is plenty of room for development. With the hierarchical diagnosis and treatment, thousand county projects and other policies, the allocation of primary medical institutions is promoted.

At present, some innovative medical devices in China have initially explored the path of internationalization, and a number of high-quality and successful medical device companies have emerged in the process of internationalization. Sun Yuanyuan, an analyst at Societe Generale Securities, suggested paying attention to medical device enterprises that have a global vision, both technical strength and product advantages, and have accumulated overseas sales capabilities, such as Meirui Medical, United Film Medical, New Industry, Yirui Technology, high-value consumables enterprises Huitai Medical, Nanwei Medical, Xinmai Medical, Sano Medical, etc.

Potential Stock Selection

Mindray Medical (300760) huge R & D investment

The company's performance in 2023 maintained a steady growth trend. Revenue from life information and support business increased 13.81 year-on-year, and new medical infrastructure promoted the company's business. Revenue from in vitro diagnosis business increased 21.12 percent year-on-year. Specifically, the recovery of regular diagnosis and treatment volume helped steady growth, and revenue from medical imaging business increased 8.82 percent year-on-year. In the future, with the continuous development of ultra-high-end ultrasound platform ResonaA20, it is expected to accelerate the ultrasound localization rate. Guolian Securities pointed out that the company continues to increase its research and development efforts. In 2023, R & D investment was 3.78 billion billion yuan, an increase of 18.43 percent over the same period last year, accounting for 10.82 percent of total revenue. The company continues to enrich the innovative product matrix, the introduction of 4K three-dimensional electronic thoracic and celiac endoscope system UX5 series, the whole laboratory intelligent assembly line MT8000 and ultra-high-end whole-body desktop color ultrasound ResonaA20, intelligent medical ecosystem "Sanrui" program to provide the whole hospital series intelligent overall solution, recognized by customers.

United Shadow Medical (688271) Enhanced competitiveness in the high-end market

The company is also actively expanding overseas emerging markets while cultivating the domestic market. The company's business network has covered 65 countries and regions around the world, and has obtained more than 700 product registration certifications or quality management system certifications, 45 products have obtained CE certification, 44 products have obtained FDA510(k) certification, and the sales network covers major developed markets and emerging markets around the world. In 2023, the company's domestic revenue grew 19.7 percent year-on-year, overseas revenue grew 54 percent year-on-year, and the share of overseas revenue increased to 14.7 percent. Southwest Securities pointed out that in March 2023, the "Large Medical Equipment Configuration License Management Catalog (2023)" was released, medical institutions to purchase CT and MR equipment is no longer subject to configuration certificate restrictions, high-end imaging equipment procurement demand is expected to accelerate. In 2023, the company's MR business line grew 58.5 year-on-year, is one of the few companies in the world with 1.5T, 3.0T and 5.0T full magnetic field strength imaging equipment pipeline, in the high-end market competitiveness will be further enhanced.

Huitai Medical (688617) Brand Capacity Continues to Improve

In 2023, the company's sales of electrophysiological products increased steadily, and more than 300 new hospitals were implanted in China, covering more than 1100 hospitals. At the same time, the domestic electrophysiological business has been upgraded from traditional two-dimensional surgery to three-dimensional surgery as scheduled, and a good three-dimensional product market brand has been established. In 2023, the company completed more than 10,000 three-dimensional electrophysiological operations in more than 800 hospitals, an increase of more than 200 percent over 2022. Cinda Securities pointed out that the company's international business showed a good growth trend in 2023 as a whole, up 72.62 percent year-on-year. From the perspective of product line, PCI independent brand and EP independent brand are the driving sources of international business growth. The company focuses on international clinical academic exchanges and expert experience sharing activities for clinical application of products around coronary intervention CTO surgery, complex PCI surgery, electrophysiological surgery and peripheral intervention surgery, further demonstrating the clinical value of the company's core products and gaining wide praise from surgeons and experts.

South Micromedicine (688029) Minimally invasive medicine Instrument tap

the company's main business is the research and development, manufacturing and sales of minimally invasive medical devices. its main products include three series of endoscopic diagnosis and treatment devices used in conjunction with endoscopes, microwave ablation equipment and consumables, and disposable endoscopes. it has developed six sub-series of products such as expansion, biopsy, hemostasis and closure, EMR/ESD, ERCP, EUS, which provide an overall solution for minimally invasive surgery based on digestive endoscopes, it is the most complete product line of endoscopic medical equipment consumables in China. Societe Generale Securities pointed out that with the continuous improvement of the penetration rate and popularization rate of endoscopic diagnosis and treatment in China, the value of the company's products for early screening of digestive tract cancer is gradually highlighted, and the sales of such products are expected to continue to expand with the growth of the industry. In the future, the sinking of channels to the grassroots level will also raise the "ceiling" of the industry. The gradual release of new products, including visual product lines, will bring new highlights to the company's performance growth. With the continuous improvement of the company's overseas product pipeline and the deepening of marketing reform, the contribution of overseas revenue is expected to continue to grow.