Biopharmaceutical industry: pay attention to the drug circulation sector rebound opportunities

Ping An Securities on January 30 released a biopharmaceutical industry research report, the report summarized as follows:
drug circulation sector is in a state of overstorm: From the second half of 2017, the market realized the negative impact of the two-vote system on the circulation industry began to reflect, the circulation industry's stock trend after the previous round of high-profile progress began to retlow. Excluding pharmacies, the drug distribution sector has seen its share price (arithmetic average) fall 11 per cent in the past four months and its share price (arithmetic average) fall 15 per cent in the past eight months.The market in the
sector is divided, with the local circulation enterprises represented by Yan Yan Pharmaceuticals falling in share prices, small circulation companies in the last quarter of the average stock price correction of about 15%, the average share price correction of about 30% in the last six months;
drug distribution sector has been out of the lile and is expected to see a rebound in share prices:
has four provinces with a two-vote system by 2016, 11 provinces with a two-vote system by the third quarter of 2017 and 21 provinces with a two-vote system by the end of 2017. So in the fourth quarter of 2017, two-thirds of the country's provinces have implemented a two-vote system, while other provinces that have not yet implemented the pattern of distributors are also being adjusted ahead of time. Therefore, it can be speculated that by the fourth quarter of 2018, the two-vote manufacturing business decreased, thus suppressing the industry growth factors are basically eliminated, industry growth is expected to pick up. Since the actual adjustment time of the distributor will be ahead of the two-vote time stipulated in the official document, the industry recovery may also be advanced to the third quarter of 2018. The stock market reaction to the real economy expectations, the stock market performance will be ahead of the real economy, so we think the pharmaceutical circulation sector is expected to rebound in the middle of this year.Investment Advice:
Circulation Section, Recommended Liuzhou Pharmaceuticals: According to our earnings forecast, the company's net profit attributable to the parent company is expected to grow by 26% in 2017, corresponding to 21.5, 17.4 times EPS in 2017 and 2018, with a valuation switching space of more than 20% in six months. The company actively carry out horizontal and vertical industrial chain layout, the next three years is expected to be more than 20% compound growth rate. Based on profit growth in the first three quarters of 2017, the biopharmaceutical sector PEG was 1.76 and the pharmaceutical distribution sector PEG was 1.01, while the company's value was 0.88, a rare undervalued stock with solid growth in the pharmaceutical sector. In addition, it is recommended that Dasinlin, Kyusju Tong, Shanghai Medicine, pay attention to the consistent national medicine. Recommended Haichen Pharmaceuticals: Through strengthening the marketing team building, strengthen the core varieties of sales and other measures, the company's performance continued to improve. The main variety Tora Semi due to the main competition production line transformation encountered technical bottlenecks, in the short term can not continue production, to the company to quickly improve the market share opportunities. The company is rich in research product reserves, reasonable gradient, is expected to be in the next 5 years every year there are new products. The Company's 2017-2019 EPS is expected to be RMB0.82, RMB1.13 and RMB1.53, respectively, and the current share price corresponds to PE of 50.2 times, 36.6 times and 27.0 times, respectively, with a "recommended" rating for the first time. Recommended Kailei Ying: CDMO industry law development accelerated, leading enterprises benefit significantly, maintain the "highly recommended" rating: the domestic CDMO industry by overseas transfer and domestic MAH pilot double push, the growth rate has turned up. The Matthew effect is evident in this area, and the giants will benefit fully from the industry's take-off. As a domestic CDMO leader in the promotion of traditional business at the same time actively layout CRO, preparations and other related fields, to create a "one-stop service" system, is expected to take advantage of the industry east wind to achieve platform construction. Maintain the 2017-2019 EPS forecast of 1.41, 1.94, 2.62 yuan, optimistic about the future development of the company, maintain a "highly recommended" rating.
recommend general policy medical: 1, raise the earnings forecast. Considering that Hangzhou Oral Hospital has entered a period of high growth (the three-quarter report has verified the amount of price increase), the new oral hospital from the cultivation period (3-5 years) into a profit period, the performance growth rate is expected to accelerate, while the layout of assisted reproduction and ophthalmology two excellent replication of medical services sub-industry, cultivate new profit growth points, so we raised the 2017-19 EP S to 0.62/0.84/1.14 yuan (formerly 0.61/0.80/1.06 yuan), up 46%/35%/36% YoY, corresponding to PE48/36/26X. 2, down risk is fully released. The company's share price has under been fully adjusted and valuations are in a very reasonable position (PEG tends to 1) as a result of the 16-year slowdown in earnings growth, which slowed from 27.65 per cent in 15 years to 7.8 per cent in 16 years. 3, the upward valuation space open. Oral business is expected to enter a high growth track, assisted reproduction began to contribute profits, ophthalmology business layout opened up valuation room (compared to Eyre ophthalmology, performance year-on-year compound growth of 30-35%, PE55-60X), so the rating from "recommended" to "highly recommended."
recommended Dongcheng Pharmaceuticals: the company's business steadily upward, PET-CT configuration certificate approval and decentralization expectations are strong, F18-FDG market is expected to expand, Andco performance is more likely than expected. The price of cartilage sulfate has bottomed out and is conservatively expected to rise by 30% in 2018. Fixed price increase of 11.48 yuan, currently upside down 4%, the margin of safety sufficient, "highly recommended."
recommend Fuxiang shares: the bottom is established, the performance inflection point is now, "highly recommended." In 2017, the company's profit growth slowed to single digits due to lower prices and fierce competition from some products, but the core product, Tamabatan, has maintained a trend of rising prices. Schabatan prices returned to the same level in early 2018, with prices up about 15% year-on-year and expected to remain high in 2018 without new capacity entering. Through the merger and acquisition fund into the field of fermentation API, to supplement the company's technical reserves, is expected to expand the product line to fermentation in the future. At the same time, the establishment of the merger and acquisition fund also provides a financial basis for the company's extension. In the medium term, the company's products in 15 and 16 years through the FDA and Japan PMDA certification, in 2016 began to Merck, Pfizer small batch supply, the future is expected to get more orders to open up overseas markets. In the long run, the company has more product reserves, some products such as Enqutaibin, according to law Weilun, Ramifding has entered a small trial stage, become the company's long-term growth momentum.
industry highlights: FDA issues technical guidelines for applications for phase I clinical trials of new drugs; Central Deep Restructuring Review adopts "Several Opinions on Reforming and Improving The Policy of Supply Guarantee and Use of Generic Drugs"; And generics development will usher in the spring; CFDA decides to apply five ICH secondary guidelines to encourage innovation in pharmaceutical and medical devices; Celgene's $9 billion acquisition of Juno, layout CAR-T; and The European approval of Mvasi, an anti-counterfeiting drug by Amgen-El-Jianbeiva, is optimistic about its prospects in the high-end generics sector.
: The pharmaceutical sector rose 0.84 percent last week, while the CSI 300 index rose 2.24 percent over the same period, while 26 sectors in the Shenwan Tier 1 sector rose and the pharmaceutical industry ranked 23rd out of 28 industries. The medical services sector was the biggest gainer in the pharmaceutical sub-sector, up 2.94 per cent, while the chemical api sector was the biggest faller, down -0.12 per cent. (Ping An Securities)