Category: Money tips Release Date: 2006-01-04
The current first-line "White Horse shares" market-level mining valuations become more reasonable, investment strategy better suited to "hold" rather than a radical "buy", we think that the future lies in greater investment opportunities in the market ignored the blind spot of those companies.
We adhere to the "bottom-up" stock-picking strategy. In the long term, we recommend that those with innovative R & D capability, technical process advantages, unique brand value, product marketing capabilities businesses.
In 2006, we continue to be optimistic Hengrui Medicine, Guangzhou Pharmaceutical, Tong Ren Tang, Yunnanbaiyao such as the White Horse Unit; excess proceeds from the point of view, we believe that greater investment opportunities in the future, it may come from a similar Fosun medicine, Lizhu Group Jinling Pharmaceutical such as temporarily undervalued stocks.
Once again facing the health care system reform of China's existing medical system reform "basically not successful", at the same time, China's health care system also faces new challenges.
The new medical reform, including the main idea of the "market allocation of resources combined with the government to allocate resources, public welfare hospitals and profit hospital separation, separation of medicine and drugs, possession with the Office of separation, publish health for Restructuring the Economy, Medicare Structural Reform and medicine circulation linkage between economic restructuring advance. " Currently, drug prices, the rural medical market has been a gradual rise indicates the beginning of change.
One is drug price cuts. In September 2005, the NDRC cut prices on some anti-infective drugs again, involving an amount of 40 billion yuan, is also a previous price reduction in the intensity of the largest ever held. Authorities also said that future health insurance directory of products are likely to cut prices, which will have an important impact on the entire pharmaceutical industry, especially in the past, the affected enterprises are also less likely to face lower prices of Chinese medicine.
The second is the gradual rise of the third terminal. That apart from the hospital, urban retail channels outside of the rural market. Since 2003, the Government has in some areas the pilot to establish a new rural cooperative medical system, meaning that five years after the pharmaceutical market in rural areas more than 450 billion yuan, of which 80% by the treasury.
Our view is: the pricing mechanism for drugs from production processes may result in further reduced profit margins medicine circulation; drug prices can be spread to all the medical insurance catalog products; third terminal gradually rising, but because of the rural cooperative medical care system is highly sensitive to the price of drugs, the for the low-end products are mainly involved in drugs. Therefore, future production of cheap generic drugs companies may benefit from it.
Differentiation competitive advantage companies will eventually win the differences of our business understanding of competitive advantage, specifically, includes the following capabilities: innovation and R & D capabilities; technical process advantages; unique brand value; marketing capabilities.
For chemical drugs business, the ability to differentiate new drug R & D competition in a fundamental, solving the "no I have a" problem, in addition to other self-development of new drugs by outsourcing R & D proprietary product development is also a demonstration of capacity. In addition, through technical innovation and improved technology can increase production efficiency, so we will also be regarded as a kind of innovation. For the traditional Chinese medicine enterprises and many varieties there are multiple manufacturers to produce, so the brand value is also reflected as a difference of competition, such as Tong Ren Tang hundreds of years to establish a reputation as a unique brand. With the main channel for OTC business, the promotion of products in end markets the capacity to be differentiated competition concerns.
In addition, we are particularly concerned about the corporate governance structure, a good business must be sound corporate governance structure of enterprises. We are also reminded investors concerned about the risk of changes in the company's management to buy a business is essentially buying a management team, the management change may bring to the company's positive or negative impact.
Traditional Chinese medicine industry to enjoy a high valuation we believe that the domestic pharmaceutical companies can give 15-20 times the dynamic price-earnings ratio, but the differences in valuation of different sub-sectors, the performance of traditional Chinese medicine sector in recent years better than the other sub-sectors, and traditional Chinese medicine has long been the policy sub-sectors tend to protection may be given a higher valuation.
Various sub-sectors, we believe that traditional Chinese medicine industry, there will still be outstanding performance in other sub-sectors. Previous price cuts in the past, the Chinese medicine industry, involving a relatively small, a safe haven. Although the future of medical insurance catalog products may have to cut prices, but we think that the Chinese medicines trade impact will be relatively small because: Chinese medicine is a part of China's traditional culture, national policies on traditional Chinese medicine has a certain degree of tilt; advantages of Chinese medicine company's products are country's administrative protection has become a very high barriers to entry, we believe that Chinese medicine is similar to an exclusive variety of drugs from abroad, and its stronger protection measures; In addition, the multitude of Chinese medicine books, many of the traditional medical side to be discovered, provided the birth of artemisinin a kind of "westernization of Chinese medicine," the idea of development of Chinese medicine could bring new opportunities. Yunnan Baiyao, Tong Ren Tang is the Chinese medicine industry, a typical representative of dominant enterprises.
Blind spot from the market to look for varieties of defensive medicine, as the dark horse in 2005, a spot, at present the whole a reasonable valuation. Among them, a number of high-quality listed companies after three years of market baptism, valuation levels are reasonable and even high. Clearly, the holders of these "White Horse Unit" difficult to obtain excess returns, but the pharmaceutical industry does not mean that there is no new investment opportunities. We believe that the market, there are some blind spots have been neglected, these companies may become in 2006 a "dark horse."
According to a top-down investment strategy, we believe that next year's investment opportunities may exist in the following areas.
First, the split share structure reform opportunities. Market funds in the treasure hunt-style chase the high of the price of the program, some of the good fundamentals of listed companies due to various reasons difficult to pay the right price in the short term are ignored. But the stock reform will not change the company's fundamentals, these companies still have investment value, and because of the short term have been neglected leading to stock funds fell below a reasonable valuation. A typical example is Fosun medicine, Lizhu Group. We believe that the stock price lower than the value of time will not be long lasting, these companies will be the market value of recognition, thus there may be excess revenue opportunities.
Second, restructuring or business opportunities offered by structural change. Fundamentals of corporate restructuring will bring about great change. In 2005 we recommended the river Guangzhou Pharmaceutical and medicine will be of this type of situation. We believe that 2006 is likely to be ignored by the market there are still some companies, and their improvement in fundamentals has been or will soon.
Third, with explosive growth prospects come on the market opportunities. If the pharmaceutical companies develop a "blockbuster" type drugs, will bring huge profits. International sales of more than 500 million U.S. dollars even if the "blockbuster" drugs, while at home, single-product sales 100 million even if a good species. From the perspective of foreign enterprises, profitability, to focus on several key species, such as Pfizer's first 10 months of product sales in more than one billion U.S. dollars, the largest of more than 10 billion U.S. dollars. While domestic pharmaceutical companies have a huge number of products, but the future will increasingly rely on a few core species, the number of sales of millions of products reflects differences in the competitiveness of enterprises. A typical example is that in 2005, Zhejiang Medical, the company launched Coenzyme Q10 has good market prospects in the short term to bring significant benefits to the company. We believe that the listed company's product line, there will be plenty of similar opportunities to the explosive growth potential.
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