Which pharmaceutical stocks does the national team have heavy holdings in?
2024-07-21
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Established pharmaceutical companies make profits by reducing costs and increasing efficiency, while emerging companies make profits by expanding markets.
Text | "Caijing" reporter Zhao TianyuHalfway through 2024, the performance of the pharmaceutical and healthcare industry is gradually coming to light.
As of July 18, 97 A-share pharmaceutical and health industry companies disclosed their first-half performance forecasts, of which 58 are expected to achieve net profit growth and 39 are expected to decline. In addition, four-fifths of the companies have not yet disclosed their performance.The performance forecast at this time is generally not audited by a certified public accountant, and provides a preliminary estimate to let the market know whether the company has made a loss or a profit in the past six months.Overall, the pharmaceutical and health industry is still a relatively good asset. One indicator to observe is the "national team"PositionsThe situation is that this is composed of national investment companies and fund management companies and is an important long-term fund.As of the end of the first quarter, the national team is stillAdding positionsPharmaceutical sector.Which pharmaceutical companies had a good first half of the year? How were the performances of the companies held by the national team?
These companies that maintain good performanceLooking at the 97 pharmaceutical and healthcare companies that have disclosed their semi-annual performance forecasts, the majority achieved performance growth in the first half of the year.
Among them are many established pharmaceutical companies, such as Harbin Pharmaceutical Group and North China Pharmaceutical. On July 10, Harbin Pharmaceutical Group disclosed that its net profit for the first half of the year is expected to be between 312 million yuan and 375 million yuan, an increase of 71% to 105% compared with the first half of last year, and an increase of 84% to 120% in net profit.Harbin Pharmaceutical Group was listed on the Shanghai Stock Exchange in June 1993. It was the first listed company in the pharmaceutical industry in China at that time and the first listed company in Heilongjiang Province. Currently, the company focuses on pharmaceutical industry and commercial business, and its products with sales of over 100 million yuan include zinc gluconate oral solution, Shuanghuanglian oral solution, amoxicillin capsules, etc.Harbin Pharmaceutical Group Co., Ltd. stated that the main reason for the expected increase in net profit in the first half of 2024 is the improved performance of the industrial sector, and the increase in gross profit margin through in-depth development of key product markets.In mid-July, during an exchange with investment institutions such as China Cinda Securities and Taikang Fund Management Co., Ltd., Meng Xiaodong, chief financial officer of Harbin Pharmaceutical Group, said that the company will control product production costs and various expenses, and actively seek and cultivate new profit growth points.North China Pharmaceutical was founded in the same era as Harbin Pharmaceutical and was listed on the Shanghai Stock Exchange in 1994. North China Pharmaceutical started out as a large-scale manufacturer of antibiotics and still has traditional advantages in the field of antibiotics. It has many penicillin series and cephalosporin series products, covering most varieties from raw materials to preparations, and has established a complete product chain from fermentation raw materials to semi-synthetic raw materials to preparations.However, in terms of profit scale, North China Pharmaceutical is not as good as Harbin Pharmaceutical, and its net profit is expected to be around 70 million yuan in the first half of 2024. However, the profit growth is not small, compared with the same period last year, it increased by about 43.45 million yuan, an increase of about 164%.Since 2018, the National Medical Insurance Administration has carried out nine batches of national drug procurement, including a total of 374 drugs, with an average price reduction of more than 50%. Old pharmaceutical companies based on generic drugs have continuously adjusted their expectations. A common factor that can still achieve good profit growth in 2024 is to control costs.North China Pharmaceutical is no exception. The company said its profitability improved in the first half of the year due to adjustments to its product structure, strengthening procurement management, reducing procurement costs, implementing lean management, and taking measures to deepen cost and expense control.Established companies can make money by focusing on reducing costs and increasing efficiency, while emerging companies are expected to see an increase in performance generally because their products are gradually opening up the market.Science and Technology Innovation BoardThe performance of emerging companies was even more impressive. For example, innovative device companies Micro Electrophysiology and Cardiovascular Medical both announced that their performance in the first half of the year would increase. Micro Electrophysiology's net profit increased by 596% to 828% compared with the same period last year, while Cardiovascular Medical's net profit increased by 40% to 50%.Micro-electrophysiology is engaged in the field of cardiac electrophysiology, targeting diseases such as atrial fibrillation. The company has been listed on the Science and Technology Innovation Board for less than two years and was not profitable when it was listed. In the first half of the year, the company's profit is expected to be between 15 million and 20 million yuan. The reason for the significant increase in net profit is that the overall sales volume in the first half of the year achieved rapid growth, and the sales share of high-value consumables such as pressure monitoring radiofrequency ablation catheters, cryoablation series products, and microelectrode radiofrequency ablation catheters increased significantly.Sinomed Medical mainly produces stent system products. The company's new products, a straight-tube thoracic aortic covered stent system and a branched intraoperative stent system, have seen steady growth in sales revenue and profits due to the rapid growth in the number of hospitals entering and the number of terminal implants in the first half of the year.The performance of this type of enterprise comes from its enterprising spirit, so it is keen on any market with potential opportunities. A common feature is that it has ambitions for overseas markets.Cardiovascular Medical is promoting the market access and promotion of aortic and peripheral interventional products in Europe, Latin America, Asia-Pacific and other countries, while promoting pre-market clinical trials of new products in Europe and Japan; micro-electrophysiology is also promoting the market access and promotion of products in Europe and other countries, hoping to increase penetration in overseas markets.
The downhill road is not easy to walkIn the first half of the year, some Chinese medicine companies also experienced shrinking performance.
Yiling Pharmaceutical's net profit in the first half of the year was 434 million yuan to 642 million yuan, down 60%-73% from the same period last year.After the COVID-19 pandemic, the demand for respiratory disease drugs such as Lianhua Qingwen has dropped sharply. Yiling Pharmaceutical has been plagued by high inventory and poor sales since 2022, and no better solution has been seen.Yiling Pharmaceutical said that the current decline in profits was mainly due to the impact of respiratory products on the high base comparison of the same period last year and the decline in market demand.This period has entered a downward slope of performance. In 2023, revenue fell 17.67% from the previous year, and net profit fell 45.58%. This situation has not improved so far.The decline in Yiling Pharmaceutical's performance is still temporary, but there are still a number of more conservative Chinese medicine companies that are experiencing a decline in performance due to a combination of factors, such as Buchang Pharmaceutical.Buchang Pharmaceutical expects its profit scale in the first half of the year to decline by 64% to 75% compared with the same period last year. There are more reasons for the decline in profits, such as the reduction in sales of some products due to restrictions on medical insurance or being included in the key monitoring catalogue of some provinces; the price of Chinese medicinal materials for some products has increased compared with the same period last year, which has increased costs; the decline in revenue has led to a weakening of economies of scale, an increase in the cost rate of some products, and a decrease in government subsidies compared with the same period last year.The gross profit margin of traditional Chinese medicine injection products reached as high as 95%, and it was once the flagship product of Buchang Pharmaceutical, but now it is impossible to make money without doing anything.Buchang Pharmaceutical's Guhong Injection, Compound Brain Peptide Ganglioside Injection, and Compound Tritide Injection are all provincial supplementary medical insurance drugs. In the process of building a unified national medical insurance drug catalog, they will gradually withdraw from the provincial medical insurance catalogs from 2020 to 2022, and will have all withdrawn by the end of 2022. Affected by this, the revenue of these three injections in 2023 will drop sharply by 1.746 billion yuan compared with the previous year.The above three injections are precisely Buchang Pharmaceutical's products with higher gross profit margins in the cardiovascular and cerebrovascular field. In 2022 and 2023, the combined average gross profit margins of these three injections were 95.82% and 94.80% respectively, while Buchang Pharmaceutical's average gross profit margin in the cardiovascular and cerebrovascular field was also high at that time, exceeding 70%.The sales of these products have dropped sharply, dragging down Buchang Pharmaceutical.The national team’s shareholding favors pharmaceutical companiesLooking at the long term, overall, pharmaceuticals are still good assets. As of the end of the first quarter of 2024, the national team has increased its holdings in pharmaceutical stocks.
The national team includes China Securities Finance Corporation, Central Huijin Asset Management Co., Ltd., National Social Security Fund, etc. As the ballast of the market, the holdings of the "national team" have always been relatively stable.According to Huatai Securities, in the first quarter, the national team's positions continued to recover, increasing holdings in sectors such as banking, pharmaceuticals, electronics, and basic chemicals.As of the end of the first quarter, the national team held shares in 104 pharmaceutical and health companies, which were widely distributed and accounted for about one-fifth of the total number of pharmaceutical and health stocks.Among them, the national team holds the highest proportion of shares in Wuwu Biotechnology, 10.7%. As of the end of the first quarter, the National Social Security Fund 112, National Social Security Fund 406, and National Social Security Fund 115 were the top ten shareholders, holding a total of 51.7874 million shares.In terms of performance, in the first quarter, Iwu Biotechnology's net profit was 77.2073 million yuan, up 9.55% year-on-year, and revenue increased 18.08%. Iwu Biotechnology is a biopharmaceutical company engaged in the diagnosis and treatment of allergic diseases, mainly engaged in desensitization treatment.The second largest national team holding is the old pharmaceutical company North China Pharmaceutical, which held 9.03% of its total share capital by the end of the first quarter. Shareholders include Central Huijin Investment and China Securities Finance Asset Management.The pharmaceutical company with the highest market value currently held by the national team is Hengrui Medicine, which also has the highest market value among all A-share pharmaceutical companies.Among the pharmaceutical companies held by the national team, the second to fifth places by market value are Yunnan Baiyao, Pianzihuang, Baiyunshan, and Tongrentang, all of which are leading companies in the traditional Chinese medicine industry.Among the above-mentioned traditional Chinese medicine companies, the youngest has been listed in the capital market for more than 20 years.These companies emphasize the word "stable" and all have their own stable flagship products. Yunnan Baiyao's Baiyao series core products have a gross profit margin of 70.6%. Yunnan Baiyao aerosol sales revenue exceeded 1.7 billion yuan in 2023, a year-on-year increase of 15.27%; Yunnan Baiyao ointment sales revenue also exceeded 900 million yuan. These two products are both over-the-counter drugs and state-confidential prescriptions.Similarly, the prescription and process of Pian Zai Huang are also protected as state secrets; Baiyunshan has brought together 12 time-honored Chinese pharmaceutical companies, known as "Southern-style Chinese Medicine"; Tongrentang is also a time-honored Chinese medicine company, which can achieve an annual revenue of more than 1.2 billion yuan overseas, and its gross profit margin is higher than in China.At present, these companies also have the spare capacity to promote the spin-off and listing of their subsidiaries. Pien Tze Huang has plans to promote the listing of its cosmetics company, and by the end of 2023, it is carrying out audit and asset evaluation work related to the shareholding reform; Tong Ren Tang Group is strong, and its Tong Ren Tang Medical Care recently submitted an application for listing on the Hong Kong Stock Exchange. If the IPO is successful, it will become the fourth listed company under the group.However, even for leading pharmaceutical companies with high market capitalization, the national team does not buy all of them. In the pharmaceutical and health industry, which has a rich variety of business formats such as pharmaceutical companies, device companies, CRO (pharmaceutical research and development outsourcing), private hospitals, pharmaceutical commerce, and medical beauty, the national team prefers to hold pharmaceutical companies.Among the 104 pharmaceutical and health stocks held by the national team, pharmaceutical companies account for the majority, reaching 71, while other companies such as medical devices account for only 33. This proportion is higher than the overall distribution of A-share pharmaceutical companies.For example, Mindray Medical, a leading medical device company, was the company with the highest market value in the pharmaceutical and health industry as of July 18, but there was no national team. WuXi AppTec and Aier Eye Hospital, which are engaged in CRO and ophthalmology clinics respectively, are both in the top ten in the industry by market value, but there was no national team either.Regarding the national team's style, some investors described it as "patient capital."For example, the National Social Security Fund is a national social security reserve fund used to supplement and adjust social security expenditures such as pension insurance during the peak period of population aging. In the 2022 National Social Security Fund Council's annual report on social security funds, it is mentioned that the agency's investment philosophy is to adhere to and continuously enrich and develop "long-term investment, value investment, and responsible investment", prudently carry out investment operations and management, ensure fund safety, and achieve value preservation and appreciation.To this end, in 2022, the National Social Security Fund Council has increased its equity investment in key areas such as key infrastructure construction, integrated circuits, intelligent manufacturing, and medical health.However, even for a national team that focuses on stability and prudence, investment returns will fluctuate with market conditions.For example, in 2021, the investment income of the social security fund was 113.18 billion yuan, and the investment return rate was 4.27%; in 2022, the investment income was -138.09 billion yuan, and the investment return rate also dropped to -5.07%.However, in the long run, the investment returns are still considerable. The average annual investment return rate of the social security fund from its establishment to 2022 was 7.66%, and the cumulative investment income reached 1,657.54 billion yuan.
