Pharmaceutical Industry Weekly Report: Short-term irrational pessimism in medicine can be doubled in the medium and long term.

Market review: this week, the pharmaceutical biological index fell 7.34%, underperformingCSI 300Since the beginning of 2022, the pharmaceutical industry has fallen by 22.42%, underperforming the CSI 300 index by 3.65 percentage points, ranking 23rd in the industry’s rise and fall. This week’s pharmaceutical industry valuation level (PE- TTM) is 25.5 times, the premium rate relative to all A shares is 88% (-9pp), and the relative exclusionbankAfter all, the premium rate of all A shares was 44% (-5.6pp), compared with the CSI 300 premium rate of 127% (-12.6pp). From the perspective of the pharmaceutical sub-industry, 0 sub-industry sectors rose this week, and hospitals were the sub-industry with the largest increase, with an increase of about -3%. Offline pharmacies and chemical preparation sub-sectors ranked second and third in terms of growth, about -4.7% and -6.2% respectively. The sub-sector with the biggest year-to-date gain is pharmaceutical circulation, down about 8.4%.

Medicine is irrational and pessimistic in the short-term, and can be doubled in the medium and long-term. Under the background of severe epidemic, external interest rate hikes and shrinking balance sheets, RMB depreciation, and macroeconomic pressure, the overall market has undergone a relatively large adjustment this week, and the pharmaceutical sector is also facing irrational declines in the short term.After nearly a year of correction, the valuation of the pharmaceutical sector has been at a historically low level (PE-TTM is 26 times).fundThe holdings are also in the lower area. Looking ahead, considering the impact of the epidemic on the operation in March and April, we believe that the pharmaceutical sector will usher in 22Q1 and Q2.performanceAt the end, the third and fourth quarters are expected to improve, the medium and long-term fundamentals are stable, and long-term funds can be more optimistic. We expect that the follow-up epidemic “social zero” is coming, and it is recommended to add post-epidemic varieties, such as routine diagnosis and treatment services and new medical infrastructure related tracks (medical service, medical equipment sector leader). Combining the disclosure of the annual report and the first quarterly report to the end, it is recommended to focus on three directions:traditional Chinese medicineSectors and supply chains are independently controllable, such as the field of pharmaceutical equipment consumables, and small-cap stocks with low valuations and growth potential.

According to our 2022 annual strategy, in the normalization of medical insurance pressure and the post-epidemic era, we will focus on looking for “traversing medical insurance” and “epidemic desensitization” varieties.In the future, medical insurance pressure will become the norm. On the one hand, we believe that leading pharmaceutical companies such asHengrui Medicine、Mindray MedicalIt is expected to cross the “medical insurance barrier” through “continuous innovation + internationalization”; on the other hand, medical insurance immunization is still a better choice. For the downstream ToC side, focus on varieties that do not account for medical insurance, such as self-paid biological drugs,traditional Chinese medicineConsumer goods, medical and beauty upstream products, etc.; while the upstream ToB side of the industrial chain is relatively immune to policies, such as innovationnew industryChain CXO plate, the equipment plate includes medicine machine equipment, pharmacy automation equipment, consumables production equipment, etc., life science reagent consumables, etc.In the post-epidemic era, we believe that we should focus on the “desensitization” field of the epidemic, 1) vaccine varieties or vaccine oversold varieties that are not disturbed by the new crown; 2) low-valued or low-expected varieties with a PEG less than 1 and an upward long-term fundamental trend ; 3) Previously damaged by the epidemic and future demand recoverymedical servicespecies, etc.

This week’s solid mix:Mindray Medical(300760)、WuXi AppTec(603259)、Zhifei Biological(300122)、Pien Tze Huang(600436)、Yunnan Baiyao(000538)、Tongrentang(600085)、Amic(300896)、Hengrui Medicine(600276)。