Pay attention to investment opportunities in the context of price fluctuations of Chinese herbal medicines

The price of Chinese herbal medicines rose sharply in March. In April, the price of crude oil rose steadily. In late May, it rose sharply again. The monitoring data released recently by the Chinese Medicines Information Center of the Chinese Medicine Association also shows that in the past five months, of the 537 varieties of herbs, prices rose by about 69% year-on-year. Among them, the number of medicinal herbs with the increase of 21% to 50% was the highest, accounting for 40%; there were 16 varieties with the increase of 181% - 300% and above. However, according to the information of Anguo Pharmaceutical City, in June, the merchants faced closed storage conservation, the trading of medicinal herbs further slowed down, and prices of varieties with high prices and relatively large gains in the previous period began to fall. Among the 112 varieties of price changes, there are 52 price increase varieties and 60 fall price varieties. The price-dropping varieties have exceeded the price-raising varieties in quantity, and the overall market price increase in three years may come to an end.

From the perspective of the causes of price fluctuations, in the context of ample liquidity last year, Chinese herbal medicines were more obviously overheated by hot money. This year, influenced by climatic factors, the drought reduced production and led to a reduction in supply.

Since last year, the Chinese patent medicine manufacturing industry has been adversely affected by the continuous rise in prices of upstream raw materials and the price reduction of products. The profitability of some proprietary Chinese medicine manufacturers, such as Kangyuan Pharmaceutical, Jiangcai, and Yabao Pharmaceutical, has declined. general. Companies such as Zixin Pharmaceuticals and Kangmei Pharmaceuticals involved in the trade of Chinese Herbal Medicine Pieces and Chinese Herbal Medicines were favored last year. Their stock prices performed well in the second half of last year, but this year was affected by the downward adjustment of the overall industry valuation. Consolidated for some time.

We believe that the profitability of Chinese patent medicine manufacturing companies is mainly due to the fact that most of the key products have entered the medical insurance catalog, and the pricing of medical insurance products is controlled by the government. The price adjustment of these preparation products generally lags behind the increase in costs. Under this pricing mechanism, those enterprises that have relatively little raw materials for Chinese herbal medicines and relatively high prices for corresponding materials will be affected. On the other hand, those enterprises that have strong control over the resources of upstream Chinese herbal medicines will be less affected. Under the background of the prevailing government regulation of the prices of essential drugs and medical insurance drugs, the operating performance of Chinese patent medicine companies has been significantly affected. The previous "Suizhong Incident" caused the industry to reflect on the "only low price is the take" model of drug bidding, and will pay more attention to the quality of products, the effectiveness of drug safety and the healthy development of the industry.

According to industry sources, the National Development and Reform Commission will start the investigation of the supply of Chinese herbal medicines in the near future and formulate a scientific mechanism for the pricing of proprietary Chinese medicines. 102 kinds of proprietary Chinese medicines in basic medicines are expected to usher in price adjustments. This will undoubtedly bring benefits to Chinese patent medicine manufacturing companies.

Based on this analysis, based on the rise in the price of Chinese herbal medicines is difficult to continue, the profitability of Chinese patent medicine companies will return to a reasonable level, and the valuation will return to a reasonable level. Chinese medicine companies still have good investment value. We are mainly optimistic about the following types of investment opportunities: First, modern Chinese medicine companies with outstanding research and development capabilities, Chinese herbal medicines account for a relatively small proportion of the cost, and government pricing should be subject to certain concessions, such as Kangyuan Pharmaceutical and Yijing Pharmaceutical; The fast-consumer brand Chinese medicine companies with prominent brand position and relatively strong self-pricing capacity (mainly producing OTC, health care products, and health products), such as Dong'e Ejiao and Yunnan Baiyao; thirdly, they have better control over the resources of upstream Chinese herbal medicines. Traditional Chinese medicine companies such as Kangmei Pharmaceutical and Kunming Pharmaceutical.