The Zhitong Finance App learned that Guojin Securities released a research report saying that in the third quarter, the pharmaceutical sector continued to bottom out due to in-hospital adjustments, major changes in the consumption environment, and some health insurance fee control policies, and the Q3 quarterly boom continued to bottom out, and the recovery was slower than expected. However, judging from the segment segments, there are differences in the performance of the different tracks. The overall performance of the pharmaceutical sector is relatively good; the performance of some tracks and individual stocks in the biological products, traditional Chinese medicine, medical devices, and upstream manufacturing sectors is growing well; while other sectors are under relative pressure. However, considering that the current sector base is low, the boom is gradually recovering, inventories are fully cleared, and capital is also at a low level, we are optimistic about the stock price elasticity brought about by the fundamental rebound in the pharmaceutical sector in 2025.

The main views of Guojin Securities are as follows:

Pharmaceutical sector: The boom is relatively high, and there is more room for innovative products to spend and go overseas.

Although the Q3 boom in the pharmaceutical sector also declined, overall, there were relatively many bright spots in the pharmaceutical sector, and many stocks continued to achieve performance growth in the third quarter. Compared to apparent performance, innovative drugs should pay more attention to the progress of pipeline R&D and external licensing; in addition, a large number of innovative drug companies listed on the Hong Kong stock market do not disclose three-quarter reports. Therefore, the analysis of the domestic innovative drug industry's boom should not be limited to the three-quarter performance report. Overall, the trend of commercialization of domestic innovative drugs and overseas licensing is still worth looking forward to, and innovative drugs are still the most anticipated potential track for the pharmaceutical sector in 2025. Hospital restoration, leading reforms, and continued release of popular varieties. There are also many hot topics worth paying attention to in generic drugs and APIs.

Biological products: Segmented track performance is divided, and high-growth varieties on some racetracks have performed well.

The performance of biological products in different segments was remarkable in the first three quarters: 1) the slow hepatitis B cure circuit had an excellent competitive pattern, large room for improvement in penetration, and the strong growth attributes of large single products of long-acting interferon were further highlighted; 2) the overall performance of companies corresponding to immediate hospital demand products such as blood products and insulin remained stable; 3) Affected by factors such as changes in the market environment and price system adjustments, some companies were under pressure in the third quarter.

Medical services and consumer medicine: Short-term profits are under pressure, and attention is being paid to the progress of new hospital products.

The overall performance of medical service companies continued the trend of the first half of the year, and revenue remained resilient. At the same time, as some medical service institutions accelerated the pace of investment expansion in 2021-2023, rigid expenses such as depreciation and amortization of various assets, labor costs, and period expenses generated after the official opening of the new hospital had a significant impact on cost and expense growth, thus affecting the company's overall profit.

Medical devices: Good overseas and domestic exploration in Q3, optimistic about the improvement in equipment procurement and demand for reagent consumables in 2025.

Demand for medical equipment tenders is mainly limited by multiple factors such as medical sector rectification and medical equipment renewal projects, leading to delays in hospital procurement. Demand for equipment tenders is expected to be rapidly repaired in 2025. Leading medical device companies with strong product strength increased their overseas market expansion efforts and layout. The overseas market growth rate in the third quarter was generally higher than that of the domestic market.

Traditional Chinese medicine: The outside of the hospital is in an adjustment period under a high digestive base, and the hospital is watching the progress of collection.

The out-of-hospital market digested the high base of 2023 and is in the inventory removal adjustment stage, awaiting recovery outside the hospital. The hospital continues to be optimistic about the amount of exclusive varieties collected and released. With policy support, innovation in traditional Chinese medicine is expected to become a new export in the context of collection.

Pharmacies: The pace of expansion is slowing down, reducing costs and increasing efficiency, and improving the quality of operations have become the main themes.

Due to factors such as changes in the overall consumption environment, adjustments in health insurance payment policies, industry order adjustments, and flight inspections, etc., the profit side of listed pharmacy chains is under overall pressure, and it is expected that further coordination will be implemented after the management of the industry's business order.

Upstream pharmaceuticals: Enterprise innovation continues to advance, waiting for the inflection point of the boom.

The revenue and profit performance of reagent and consumables companies both improved significantly year-on-year. Pharmaceutical equipment companies were relatively slow to recover as second-tier downstream pharmaceutical companies, and the profit side growth of scientific instrument companies through management improvements was more significant than on the revenue side.

Investment advice

Guojin Securities said it is optimistic about the flexible stock price performance brought about by the fundamental rebound in the pharmaceutical sector in 2025. Therefore, in terms of investment strategies, more attention should be paid to the improvement prospects of the industry and individual stocks in 2025. Apart from investing on the booming circuit on the right, the reversal opportunities for the bottom left sector and the target market deserve the same amount of attention. In terms of sector layout, it is recommended to focus on the pharmaceutical sector, where prosperity continues to be high, and overseas and commercialization continue to be realized; as well as some left-hand varieties in the fields of pharmacies, equipment, traditional Chinese medicine, and consumption that may reverse expectations.

Key targets: Tebao Biotech (688278.SH), Renfu Pharmaceutical (600079.SH), Columbotai Bio-B (06990), Antu Biotech (603658.SH), Yifeng Pharmacy (), etc. 603939.SH

Risk warning

Exchange risk; risk of domestic and foreign policy volatility; risk of investment and financing cycle fluctuations; risk of merger and acquisition integration falling short of expectations;