Chemical pharmaceutical stocks?

On Friday (November 14, 2025), only 1,961 stocks rose, among which 94 belonged to the chemical pharmaceutical sector—the highest number across all industries. DEEKSEEK has compiled the following information for personal study. Key characteristics of chemical pharmaceutical stocks: I. Core Growth Drivers (Catalysts for Price Appreciation) 1. Launch of Blockbuster New Drugs This is the most critical driver. A successful innovative drug—especially one targeting major diseases (e.g., cancer, diabetes, autoimmune disorders)—can generate annual sales in the tens or even hundreds of billions of RMB, significantly boosting corporate value and stock price. For example: Keytruda (‘K drug’) for Merck & Co., and Opdivo (‘O drug’) for Bristol-Myers Squibb. 2. Robust R&D Pipeline and Innovation Capability Investors focus not only on existing products but also on a company’s ‘R&D pipeline’—i.e., its portfolio of new drugs at various clinical trial stages. A deep, high-potential pipeline ensures future growth and fuels substantial market optimism. 3. Patent Protection and Market Exclusivity Innovative drugs typically enjoy 20-year patent protection. During this period, the originator enjoys market exclusivity, enabling premium pricing and high margins—the fundamental source of outsized returns for pharmaceutical firms. 4. Industry Policies and Market Access Inclusion of a drug in China’s National Reimbursement Drug List (NRDL) triggers massive volume expansion and constitutes major positive news. Conversely, exclusion may severely constrain growth. Moreover, national policies encouraging innovation also lift sentiment across the entire sector. 5. Mergers & Acquisitions (M&A) Large pharmaceutical companies frequently acquire small- to mid-sized biotech firms with promising late-stage candidates to fill gaps in their own pipelines. Acquired companies often experience sharp stock price surges. II. Major Risks and Challenges (Downside Pressures) 1. R&D Failure Risk This is the single greatest risk. The probability of a new drug progressing successfully from lab to market is extremely low (<10%). Clinical trial failure—especially in late-stage trials—can be devastating, potentially slashing share prices by 50% or more. 2. Patent Cliff Upon expiration of core drug patents, generic competitors flood the market, causing precipitous declines in both price and sales volume. If the company lacks a timely replacement blockbuster, it faces severe growth stagnation. 3. Policy and Regulatory Risks Volume-Based Procurement (VBP): This is the biggest policy risk confronting Chinese chemical pharmaceutical stocks. VBP aims to lower drug prices; although it may boost volume, it usually severely erodes margins—leading to ‘revenue growth without profit growth’, or even outright earnings decline. Healthcare cost containment: Governments worldwide tightly control medical spending, routinely scrutinizing and pressuring drug prices. Regulatory approval: Drugs require rigorous review and approval by agencies such as China’s NMPA. Any delay or rejection poses material risk. 4. Intense Competition Multiple competitors often target the same therapeutic area—especially in hot areas like PD-1 inhibitors—triggering price wars that compress margins. 5. High Investment Requirements and Long Development Cycles Developing a new drug typically takes over 10 years and costs hundreds of millions to billions of USD, with highly uncertain outcomes.

Which enterprises benefit most from income tax policy?

The Ministry of Finance and the State Taxation Administration jointly issued an announcement on enterprise income tax policies for integrated circuit (IC) design and software enterprises. For enterprises established lawfully and meeting eligibility criteria, the preferential period begins from the year they first realize profits—provided such establishment occurred on or before December 31, 2018. Under this policy: Years 1–2 are exempt from enterprise income tax; Years 3–5 are taxed at half the statutory rate of 25% (i.e., effectively 12.5%). Benefits apply until the end of the preferential period. This represents a tremendous incentive! Regardless of the actual tax-saving impact, IC design and software enterprises have instantly gained elevated industrial status and heightened investor appeal. As Qiluren observes, even shell companies could rapidly become highly valuable under this framework. Applying the logic that doubled after-tax profit may lead to doubled stock price, we assess potential valuation upside for listed companies. First, we identify listed companies’ non-recurring-after-tax net profit and paid enterprise income tax (both from their 2018 annual reports). In principle, the higher the pre-tax tax payment, the greater the absolute profit uplift post-exemption. Assumption: Post-exemption profit = Pre-exemption profit + Paid income tax. Thus, potential stock price appreciation ≈ Paid income tax / Pre-exemption profit. However, valuations vary widely across stocks. To normalize, we use industry-average P/E ratio as benchmark. Adjustment coefficient = Stock’s P/E ratio ÷ Industry-average P/E ratio. Final estimated price appreciation = (Potential appreciation) × (Adjustment coefficient). Negative values and outliers are excluded from discussion here—they do not affect the underlying analytical logic. With the methodology clarified, here are the results (red figures indicate negative values): First, Integrated Circuits (i.e., chips): We selected 49 stocks within the IC concept sector. Rankings are based on adjusted upside potential. Top five: Sanan Optoelectronics, Chongda Technology, Shiyun Circuit, Jin’an Guoji, and Taiji Industrial—each showing >30% upside potential. Kangqiang Electronics, which surged to the daily limit today, shows ~13% potential upside. Beijing Junzheng offers minimal upside due to very low tax payments. Second, Software Enterprises: Given the large number of software stocks, we excluded those with non-recurring-after-tax net profit below RMB 100 million. China Software—a sector leader—is included, though its valuation logic clearly transcends this simplified model. For the full dataset, contact ‘Xiu Li Qian Kun’ (Huo Ke Li) via ‘Analysis Zhiluren’. Top five in the software group: Xinzhiknow, G-bits, 2345, Shuzhi Technology, and Shunliban—each showing >40% potential upside. Today’s limit-up stocks and their estimated upside: Qiming Information (16.65%), Tianji Technology (19%), Wanxing Technology (9.83%), Zhongfu Information (9.45%), Nantian Information (285%—unreliable due to extremely low base profit), Chengmai Technology (8.4%), Huijin Technology (20%), Beixin Source (3%), and Inspur Software (0.32%).

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