The pharmaceutical industry belongs to the rigid needs of human beings and is an industry with sustainable growth. The long-term return rate of the industry is the top two in the stock market, and it is one of the must-have directions for my long-term investment. The overestimation in the industry may be 5-10% of the position. If the underestimation is sideways for a long time, it may be allocated to about 40% of the position. My real deal started in July, and the pharmaceutical industry has been in a state of over-allocation. Let me briefly talk about the logic of the recent allocation.
1. Look at industry trends in combination with policies.
At present, the biggest disadvantage of the pharmaceutical industry is centralized procurement. Pessimistic investors believe that this policy has changed the profit model of the industry, and the pharmaceutical industry has become a processing industry, with little investment value. In my opinion, centralized procurement is a phased problem, just changing the cake-sharing model will have an impact on the pharmaceutical distribution field and pharmaceutical companies that rely on relationship development without core competitiveness, and will have little impact on the long-term development of the pharmaceutical industry.
It’s just that the epidemic in recent years has caused the country’s economy to slow down, and medical insurance has little money. In addition, the centralized procurement policy requires political achievements. It is understandable that the bargaining force is stronger. The essence is a sustainable model for everyone to share difficulties and develop together. When the economy improves in the future, the medical insurance system will definitely return to the peaceful coexistence model of common development. Anyone who has done business with suppliers may understand this.
Both the long-term plan of the 14th Five-Year Plan and the documents of the State Council in recent years are supportive to the pharmaceutical industry, especially the shortage of the national medical system exposed by the epidemic. Opinions on Quality Development”, focusing on building a new system for high-quality development of public hospitals. The core contents of the new medical infrastructure are three. One is to build high-level hospitals at the national and provincial levels, improve the ability of provincial diagnosis and treatment, and reduce cross-provincial medical treatment. The second is to set up a medical group in the city’s head hospitals to drive the grass-roots medical and health institutions to improve their service capabilities and management levels, and to improve their public health service capabilities. The third is to give full play to the leading role of county-level hospitals in the county-level medical community. The city-level tertiary hospitals will provide counterpart assistance to county-level hospitals, gradually make county-level public hospitals reach the second-level A level, and strengthen county-level hospitals and professional public hospitals. The division of labor and business integration of health institutions, and the implementation of public health services.
In terms of trends, the long-term need for pharmaceuticals to have a stable growth rate, and the State Council’s policy of strengthening and expanding public hospitals, new or upgraded hospitals must first drive the sustainable development of medical equipment (such as the recent financial reports frequently reported by the media). Subsidized medical loans are part of the supporting policies), the number of people covered by the increase in hospitals will increase, and the follow-up will also drive the sustainable development of the pharmaceutical industry.
2. Look at the investment value of the industry from the perspective of prosperity and valuation.
In terms of prosperity, you can see the performance pre-increase reports of industry companies, such as WuXi PharmaTech, Mindray Medical, Kaipu Bio, MGI, Microelectrophysiology, and Good Medical, all of which have pre-increased in the third quarter. Among them, the first three quarters of the three stocks The performance is expected to double year-on-year. Tracking the first-half reports of other companies that did not disclose third-quarter performance forecasts, more than 50% of the companies’ performance increased year-on-year. Simply understand that the prosperity of the pharmaceutical industry is currently in a state of normal preference.
Regarding the long-term prosperity of the industry, my personal opinion is that with the continuous growth of the country’s GDP, the proportion of the country’s investment in health is also gradually increasing. At present, the population structure will gradually begin to age from 2021, and industries such as innovative drugs, vaccines, medical services, innovative medical devices, high-end health products, chain pharmacies (including online pharmacies) and other industries in the pharmaceutical and medical industry will achieve good development in the future. .
In terms of valuation, the current valuation of the pharmaceutical sector as a whole is about 29 times, which is close to the bottom in 2018 and close to a 20-year historical low. It can be understood that the current price has fully reflected the expectations of policies and fundamentals. The current valuation is far from the valuation of 56 times in May 2015 and the estimate of 62 times in July 2021, and the future upside is still relatively large.
3. Views of mainstream funds on the pharmaceutical industry.
The pharmaceutical sector is one of the industries with relatively strong pricing power of public funds. Once public funds increase their positions in pharmaceuticals, there may be relatively obvious excess returns in the current quarter. For the pharmaceutical sector, a number of public fund companies or fund managers have recently prompted positive signals from the sector. Institutions generally believe that the pharmaceutical sector is in a stage with strong bottom certainty and large long-term space. Once the fundamentals marginally improve, a strong rebound can start.
According to the data of Tianfeng Pharmaceutical’s strategy team, the current over-allocation ratio of public funded medicines is at a relatively low level in the past 10 years, and it is highly probable that the allocation ratio will gradually increase in the next one or two years.
Fourth, the rate of return of the pharmaceutical industry index.
Medicine is an industry with sustainable growth, which can cross the bulls and bears. Judging from the nearly 20-year history of the pharmaceutical index of Chinese and foreign stock markets, it will reach a new high in three years in the short term and six years in the long term, and the increase from the low level is often more than double. %.
So far, the CSI Pharmaceutical Index has been falling for more than two consecutive years. Because the pharmaceutical industry’s continuous new highs belong to an unchangeable logic, it is a high probability event that the index will reach new highs in the next few years. In other words, if you are deploying low-valued pharmaceutical industry ETF funds or pharmaceutical-themed funds now, the probability of doubling profits in the next few years is very high.
Finally, let me say something about the sharp rise of the pharmaceutical index last week. If you understand the long-term trend of prices, there is no need to pay attention to short-term fluctuations. Regardless of whether the surge of less than 10% is a reversal or a rebound, it can be ignored compared with more than double the future income.
@Today’s topic $ Mindray Medical (SZ300760)$ $ Tongce Medical (SH600763)$ $ WuXi AppTec (SH603259)$
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