(Photo courtesy of Hero)
The performance of many companies in the Chinese medicine sector in the first quarter exceeded expectations -
At present, it is the intensive disclosure period of the 2023 annual report and the first quarter report of 2024 of A-share listed companies. From the perspective of the traditional Chinese medicine sector, many companies have performed well. In terms of net profit attributable to the parent company in 2023, Tasly, Kangenbei, Dong'e Ejiao, Zuoli Pharmaceutical, and Jiangzhong Pharmaceutical will increase by 505.34%, 65.19%, 47.55%, 40.27%, and 18.4% respectively. In terms of net profit attributable to the parent company in the first quarter of 2024, Zuoli Pharmaceutical, Pien Tze Huang, Jichuan Pharmaceutical, and China Resources Sanjiu increased by 46.14%, 26.61%, 24.90%, and 18.49% respectively.
For the performance of the sector in the first quarter, Zhongtai Securities said that the performance of many companies in the first quarter exceeded expectations, such as Jichuan Pharmaceutical, China Resources Sanjiu, Fangsheng Pharmaceutical, Ma Yinglong, etc., and the performance of the sector was outstanding.
From the perspective of stock price performance, as of April 23, taking the stocks in the Wind Chinese Medicine Select Index (8841367) Index as an example, there are 5 stocks that have risen by more than 30% in the past three months, Lingrui Pharmaceutical, Zuoli Pharmaceutical, Jiangzhong Pharmaceutical, Dong'e Ejiao, and Jichuan Pharmaceutical, with increases of 44.70%, 42.77%, 38.45%, 38.32%, and 34.59% respectively.
Last week, the Chinese medicine sector has begun to rise significantly. China Post Securities pointed out that from the perspective of the Chinese medicine targets that have disclosed their 2023 annual reports, more TCM OTC targets have achieved good performance, such as Dong'e Ejiao, China Resources Sanjiu, Jiangzhong Pharmaceutical, etc., and the performance of some TCM targets in the hospital has also recovered significantly month-on-month, such as Zuoli Pharmaceutical. From the perspective of valuation, the current PEG of the Chinese medicine sector in 2024 is 1.13, and the valuation of the sector is relatively reasonable, but there are still individual stocks at a low valuation level.
How do you view the investment opportunities in the Chinese medicine sector this year?//
It is worth mentioning that since the beginning of this year, the price of some Chinese herbal medicines in the upstream of the industry has begun to rise. As of March 2024, the Kangmei Chinese herbal medicine price index has almost doubled from 1229.59 in January 2017 to 2158.67. In this regard, Founder Securities pointed out that on the one hand, Chinese patent medicine covers the rising cost by raising prices, and on the other hand, the continuous rise in the price of Chinese herbal medicines also provides a good opportunity for Chinese patent medicine to raise prices. OTC varieties of traditional Chinese medicine generally have independent pricing power, and the price increase effect of exclusive varieties is more obvious, and related enterprises are expected to continue to raise prices slightly for large single products to increase profits.
In the first quarterly report of this year's fund, "ICBC Healthcare Industry: 2024 First Quarter Report Zhao Bei Ding Yang", he said, "The Chinese medicine industry continues to be supported by policies, and favorable policies such as the adjustment of the basic drug catalogue in 2024 need to be implemented." Although some companies have a 'transient' impact on the high base of performance at the end of 2023 and the first quarter of 2024, we believe that there are still large investment opportunities for those TCM companies that have indeed improved their management in the past few years and have grown steadily over the long term, so we still maintain an allocation ratio that exceeds the benchmark for the TCM sector. ”
Soochow Securities is optimistic about the performance of the Chinese medicine sector in the second quarter, and believes that with the current market's pursuit of stocks with high certainty and high dividends, the assets with high certainty such as low valuation and high dividends in the pharmaceutical sector are mainly focused on the traditional Chinese medicine sector, with a valuation of about 15-20 times and a dividend yield of 3-4%. Traditional Chinese medicine has a strong rigid demand attribute, the industrial structure of the industry has been continuously optimized, and the quality and efficiency of enterprises have been significantly improved, especially the performance of Chinese patent medicine enterprises with strong brands or large varieties is relatively stable, with abundant cash flow and low asset-liability ratio, and the company has the ability to carry out high dividends and continue to return to shareholders. Horizontal comparison of the pharmaceutical sub-sector, from 2021 to 2023, the dividend yield of the traditional Chinese medicine sector will be in the forefront, and the dividend yield will increase.
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