The United States intends to impose tariffs on some medical consumables in China, which listed companies are the most hurt

CBN

2024-05-15 17:12Posted on the official account of Shanghai Yicai

On May 14, local time, the White House announced that it intends to impose tariffs on some medical consumables in China, mainly involving syringes and needles, masks, medical rubber gloves, etc.

Affected by this news, on the morning of May 15, Beijing time, the stock prices of some low-value medical consumables companies in A-shares fell slightly, of which the injection concept stock sector index fell 1.55%.

Which listed companies will be most affected by the proposed tariff policy in the United States?

Syringe enterprise exports are under pressure

The medical consumables products that the United States intends to impose tariffs on this time are: the tariff rate on syringes and needles will be increased from 0% to 50% in 2024; For personal protective products, including masks and some respirators, the tariff will be increased from 0%-7.5% to 25% in 2024; Tariffs on medical rubber gloves will be increased from 7.5% to 25% in 2026. These products are low-value medical consumables.

According to Chinese customs data, in 2023, China's syringes (Tariff Code: 90183100) and needles (Tariff Code: 90183210) were exported to the United States at US$224 million, masks (Tariff Code: 63079010) from China were exported to the U.S. at US$74 million, and medical rubber gloves (Tariff Code: 40151200) were exported to the U.S. at US$442 million.

Masks and medical gloves are personal protective products, and when the new crown epidemic appeared in 2020, the domestic export volume once surged, but in the past year, as the new crown epidemic subsided, the market demand was decreasing, and the export value of related products was falling.

Mask Enterprise Robust Medical (300888. Chen Huixuan, deputy general manager and secretary of the board of directors, told the first financial reporter that for syringes and needles, masks, rubber medical gloves and other medical products that the United States intends to increase tariffs, the company currently only exports mask products to the United States, and the operating income is very small, and the impact on the company is also very small.

"At present, the company's medical sector comes from the U.S. market with a double-digit proportion of revenue, and even if tariffs are imposed, the impact on the company in 2024 will be small." Chen Huixuan said.

According to the recent annual report released by Wenwen Medical, in 2023, the company will achieve operating income of 8.19 billion yuan, mainly from medical consumables and healthy consumer goods, with revenue of 3.862 billion yuan and 4.263 billion yuan respectively, accounting for 47% and 52% of revenue respectively.

Mask company Ogilvy Medical (002950.HK) Zheng Xiaocheng, secretary of the board of directors of SZ, told the first financial reporter that due to the small demand for masks in the US market in recent years, the company's mask products are rarely sold to the US market.

Some medical consumables companies told the first financial reporter that the United States' proposed tariff policy may have a greater impact on medical rubber glove companies and syringe companies exporting to the U.S. market.

Frost & Sullivan's "Disposable Glove Market Status and Development Trend" shows that in terms of materials, disposable gloves are mainly divided into PVC gloves, latex gloves, nitrile gloves, PE gloves, etc. 90% of the world's PVC glove production capacity is in China, and nitrile gloves are currently the fastest growing category of Chinese companies' shipments to the world. Nitrile gloves belong to synthetic rubber gloves.

Bluesail Medical (002382. SZ) told the first financial reporter that the company's business in the United States is still developing steadily. As it stands, the proposed U.S. policy adjustment on medical products has no direct impact on the company's business. In fact, the sales revenue of gloves exported to the United States only accounts for 40% of the company's overall glove revenue, and the revenue of PVC gloves is also more than that of nitrile gloves.

According to the relevant data of the "Blue Book of Chinese Medical Devices (2019 Edition)" of the Institute of Medical Devices, the injection and puncture category in mainland China accounts for the largest proportion of the low-value medical consumables market, with a market share of 30%. China is a major producer of disposable syringes, according to UN Comtrade statistics, in 2018, the mainland exported disposable syringes to 179 countries and regions, of which the United States accounted for 45.82%, making it the largest trading partner for the export of disposable syringes from the mainland.

Among the A-share listed companies, syringe companies that export to the U.S. market include KDL (603997. SH), Adoption Shares (301122. SZ), Wuzhou Medical (301234. SZ) and so on.

KDL is one of the few manufacturers in China with a complete industrial chain of medical puncture instruments. In 2023, the company's operating income will be 2.453 billion yuan, and the revenue from the international market will be 737 million yuan.

A relevant person from the secretary office of the board of directors of KDL told the first financial reporter that it is still uncertain when the policy of the United States to impose tariffs will really land, and it is still impossible to determine what impact it will have on the company. In the company's foreign trade income, the revenue from the European and American markets accounts for about seventy or eighty percent.

Individual companies have been alerted by the US FDA for imports

Before the United States announced that it would increase tariffs on some medical consumables companies in China, some syringe companies in China had been put on import warning by the U.S. FDA, and some of them were involved in adopting shares.

On April 3, 2024, the FDA announced that it had issued an import alert to Jiangsu Adopt Medical Technology Co., Ltd., a wholly-owned subsidiary of Adoption Co., Ltd., saying that it did not meet the requirements of the device quality system to prevent plastic syringe products from entering the United States. The import alert will result in medical devices that are subject to medical treatment being detained by U.S. Customs without inspection, resulting in some medical syringe products temporarily unable to enter the U.S. market.

In an announcement issued in April, the company said that although the above information is public information on the official website of the FDA, the information will have a significant impact on the company's operation, and the company believes that it is necessary to remind investors of the above information to fully protect investors' right to know. At present, the company is actively communicating with the FDA through lawyers to solve the above problems, but it is not yet possible to accurately predict whether it can be removed from the warning list and the specific time of removal.

Adopt Co., Ltd. is one of the earliest enterprises engaged in injection and puncture equipment in China, and the company's product sales are mainly exported. In 2023, the company's operating income will be 410 million yuan, of which the revenue from syringes and puncture needles will be 271 million yuan and 107 million yuan respectively, accounting for 65.98% and 26.01% of the revenue respectively.

In the 2023 annual report, the United States is the world's major importer of injection and puncture medical equipment, and the European and American markets, especially the American market, are one of the main markets for the company's overseas sales at this stage, and the company's sales revenue exported to the American market in the past three years accounts for a relatively high percentage. If the Sino-US trade friction escalates again in the future, and the United States continues to expand the scope of products subject to tariffs on Chinese imports, which may involve injection and puncture products, the American customers may require the company to reduce the price moderately to pass on the cost, which will lead to a decline in the company's sales revenue and profitability from the United States, which will adversely affect the company's operating results.

How to cope

Under the Sino-US trade dispute, how should medical consumables companies exporting to the United States respond to it has also attracted market attention.

Bluesail Medical told the first financial reporter that in order to cope with possible market changes in the future, the company has made predictions in advance, and actively adjusted its business strategy to explore markets outside the United States, and has achieved outstanding performance in the development and operation of non-American markets in the industry. The U.S. proposed tariff policy is expected to be implemented in 2026, and there are still two years to go, so there is still some uncertainty about the specific implementation and impact.

"The company has been doing overseas layout, and has previously laid out a PVC base in Vietnam; Project opportunities in other countries have also been continuously tracked and examined over the past few years. We have enough time and resources to deploy nitrile glove production capacity overseas in the form of self-construction or cooperation to better adapt and respond to the changes and challenges of the international market. Bluesail Medical believes that through flexible strategic adjustment and continuous market development, the company can effectively cope with the impact of tariff adjustment and achieve long-term stable development of the company.

The company also stated in its 2023 annual report that the company will further increase R&D investment, continue to improve product competitiveness and profitability, continuously expand the scale and sources of revenue, and enhance its ability to resist risks, so as to reduce the direct impact that fluctuations in export business may have on the company's business.

Glove company INTCO Medical (300677. SZ) also said at its recent earnings briefing that the company plans to increase the construction of overseas production bases to eliminate the impact of future tariffs and increase market development in non-US regions.

(This article is from Yicai)