Core Insights - The article highlights the increasing trend of A-share listed companies in China engaging in physical rewards for shareholders, enhancing investor relations and creating a unique investment-consumption ecosystem [1][4]. Group 1: Company Activities - Over 30 listed companies have participated in shareholder reward activities since 2025, offering products, discount coupons, and tourism rights to investors [1][4]. - Companies like Tianyu Bio, Huasheng Co., and Beiqing Song have announced various forms of physical rewards, aiming to deepen shareholder experience with core products and strengthen their value recognition [2][3]. - The second "Listed Company Shareholder Festival" organized by Tonghuashun attracted nearly 100 companies, providing a wide range of gifts including electronics, food, and cosmetics to shareholders [3]. Group 2: Policy and Market Trends - The trend of physical rewards aligns with the China Securities Regulatory Commission's policy to enhance investor protection and improve returns for shareholders [4]. - The increasing participation of companies in physical reward activities indicates a shift from individual cases to a systematic approach in investor relations management [4]. - The practice of physical rewards is expected to become a significant indicator of corporate governance and market competitiveness in the future [4].

Core Viewpoint - Dong'e Ejiao has signed a cooperation agreement with Huawei Technologies to explore innovative development paths that integrate traditional Chinese medicine with cutting-edge technology [1] Group 1: Partnership Details - The agreement focuses on deep collaboration in areas such as artificial intelligence, big data technology applications, digital transformation, and digital operations [1] - The partnership will also involve cooperation in smart park development and ICT infrastructure [1] - Additionally, there will be efforts in cultivating digital talent [1]

10月20日，东阿阿胶股份有限公司与华为技术有限公司在深圳签署合作协议。根据协议，双方将在人工 智能、大数据技术应用、数字化转型及数字化运营、智慧园区、ICT基础设施合作，以及数智化人才培 养等方面展开深度合作。 ...

Core Viewpoint - The market experienced a correction last week, but certain stocks within the brand index showed resilience, indicating potential investment opportunities in sectors like electronics, new energy, new consumption, and real estate as uncertainties ease [1][4]. Market Performance - The market indices saw declines: Shanghai Composite Index down 1.47%, Shenzhen Component down 4.99%, ChiNext down 5.71%, and CSI 300 down 2.22%. The brand index fell 3.58% to 1956.62 points [2]. - Notable gainers in the brand index included Shanghai Jahwa up 9.42%, Changbai Mountain up 7.19%, and Darentang up 5.34%. Other stocks like Luzhou Laojiao and Yiling Pharmaceutical also saw gains exceeding 4% [2]. Stock Performance Since H2 - Since the beginning of the second half of the year, Zhongji Xuchuang has surged 156.40%, leading the gains, followed by Sunshine Power at 114.27%. Other significant performers include Lanke Technology and Yiwei Lithium Energy, both up over 60% [3]. Market Outlook - Looking ahead, the market is expected to maintain upward momentum as uncertainties gradually diminish. Liquidity is anticipated to remain supportive, with domestic interest rates low and overseas liquidity remaining loose, encouraging investment in Chinese equity assets [4][5]. - The current market environment is characterized by a shift in investment styles, with a focus on sectors that offer higher investment certainty, particularly in electronics, new energy, new consumption, and real estate [5].

Summary of the Chinese Medicine Industry Conference Call Industry Overview - The conference call focused on the Chinese medicine industry, particularly the impact of price reductions and procurement policies on listed companies and market dynamics [1][3][4]. Key Points and Arguments 1. **Price Reduction Impact**: The third round of centralized procurement for traditional Chinese medicine has resulted in an average price reduction of 63%. However, the impact on key products of listed companies is limited [1][3]. 2. **Future Procurement Policies**: The upcoming revision of the essential drug list, expected by the end of 2025 or in 2026, may include more traditional Chinese medicine products, potentially accelerating market growth [1][5]. 3. **Raw Material Price Trends**: Prices of traditional Chinese medicinal materials have been rising since November 2022 but are expected to return to previous levels by the second half of 2024. This fluctuation may affect gross margins for downstream companies [1][6]. 4. **Inventory and Demand**: Inventory levels for cold and respiratory traditional Chinese medicine products have been largely cleared, indicating that future shipments will depend more on terminal demand [1][7]. 5. **Mergers and Acquisitions**: The industry is experiencing frequent mergers and acquisitions, with companies like China Resources Group's Dong'e Ejiao and Jiangzhong Pharmaceutical actively pursuing consolidation to enhance industry concentration [1][8]. 6. **Hospital Revenue Trends**: Revenue from hospital-based traditional Chinese medicine has been declining, but the rate of decline is slowing, with profits performing better than revenues [2][13]. 7. **Investment Opportunities**: Companies with high R&D investments, such as Kangyuan Pharmaceutical and Tian Shi Li, are expected to benefit from innovative products contributing to revenue growth [1][13]. 8. **Dividend Policies**: Listed companies in the traditional Chinese medicine sector generally have high dividend payout ratios, with some exceeding 80%, indicating strong cash flow and potential for sustained high dividends [3][17]. 9. **Risks and Challenges**: The industry faces risks related to the potential underperformance of the new essential drug list, declining raw material prices affecting profitability, and intensified competition altering market dynamics [1][19]. Additional Important Insights - **Focus on Unique Products**: Companies with unique insurance products, such as Jiangzhong Pharmaceutical and Darentang, are expected to maintain a favorable competitive landscape and advantageous payment conditions [3][14]. - **Emerging Companies**: Companies like Tai Chi Group and Yiling Pharmaceutical, which are showing signs of recovery, are worth monitoring as they navigate through inventory adjustments and market demand shifts [1][18]. - **Government Reforms**: The potential for new five-year strategic plans for state-owned enterprises may provide fresh momentum for the industry, particularly for companies like Dong'e Ejiao and Jiangzhong Pharmaceutical [1][10][11]. This summary encapsulates the critical insights from the conference call, highlighting the current state and future outlook of the Chinese medicine industry, along with potential investment opportunities and risks.

Summary of Dong-E E-Jiao Conference Call Industry and Company Overview - Dong-E E-Jiao operates in the traditional Chinese medicine industry, focusing on the production and sale of various health products, particularly those based on donkey-hide gelatin [2][3]. Key Points and Arguments Business Performance - The company has maintained a medium to high growth rate in its main business, with a significant dividend payout ratio that attracts investors [2][3]. - In 2025, Dong-E E-Jiao achieved double-digit growth, with notable improvements in accounts receivable and cash flow, entering a positive cycle that supports its sustainable dividend policy [3]. Product Portfolio and Market Performance - **E-Jiao Blocks**: Account for 40%-50% of sales, with a market share exceeding 40%. Since 2019, this product has entered a rapid growth phase, establishing significant competitive barriers through online and offline channel expansion [4]. - **Compound E-Jiao Syrup**: Represents 30% of sales and has seen rapid growth due to promotion through high-level clinical evidence, particularly in tumor auxiliary treatment. Sales increased following adjustments to the medical insurance catalog [4]. - **Peach Blossom Princess**: Contributes 10% to sales, marketed as a snack product. Sales reached approximately 500 million yuan in recent years, enhanced by online and offline activities and celebrity collaborations [4]. - **E-Jiao Powder**: Accounts for 3%-5% of sales, designed similarly to instant coffee, catering to the convenience needs of younger consumers [4]. Channel Strategy - Since 2020, the company has expanded from a single OTC channel to a full-channel layout, enabling online and offline synergy. Offline strategies include experience centers and academic promotions in collaboration with leading partners, while online efforts focus on reaching younger demographics through new products [6]. - The company collaborates deeply with around 80,000 large and medium-sized pharmacies nationwide, enhancing its bargaining power and providing potential for future growth [6]. Incentive and Dividend Policies - Dong-E E-Jiao has implemented an equity incentive plan aimed at maintaining a 15% growth rate. The current cash flow situation indicates a strong dividend yield, making it an attractive option for investors [7]. Other Important Insights - The introduction of the Royal Weichang series focuses on male health, including products like brain and kidney supplements, indicating diversification in the product line [5].

Market Overview - On October 17, the traditional Chinese medicine sector declined by 0.99%, with Tianmu Pharmaceutical leading the drop [1] - The Shanghai Composite Index closed at 3839.76, down 1.95%, while the Shenzhen Component Index closed at 12688.94, down 3.04% [1] Stock Performance - Notable gainers in the traditional Chinese medicine sector included: - Weikang Pharmaceutical: closed at 23.39, up 3.54% with a trading volume of 84,100 shares and a turnover of 26.66 million [1] - Enwei Pharmaceutical: closed at 31.40, up 2.45% with a trading volume of 24,700 shares and a turnover of 78.62 million [1] - Zhongsheng Pharmaceutical: closed at 17.45, up 2.11% with a trading volume of 706,300 shares and a turnover of 1.244 billion [1] - Major decliners included: - Tianmu Pharmaceutical: closed at 18.40, down 5.30% with a trading volume of 120,100 shares and a turnover of 22 million [2] - Jilin Aodong: closed at 20.23, down 3.39% with a trading volume of 226,500 shares and a turnover of 465 million [2] Capital Flow - The traditional Chinese medicine sector experienced a net outflow of 736 million from institutional investors, while retail investors saw a net inflow of 582 million [2][3] - Key stocks with significant capital flow included: - Zhongsheng Pharmaceutical: net inflow of 72.58 million from institutional investors, but a net outflow of 131 million from retail investors [3] - Tianmu Pharmaceutical: net inflow of 19.99 million from institutional investors, with net outflows from both retail and speculative investors [3]

Core Insights - The appointment of Cheng Jie as the new president of China Resources Pharmaceutical signifies a strategic shift as the company faces challenges in traditional business growth and profitability amidst industry transformation [1][2][11] - The company reported a "revenue growth without profit increase" in its recent half-year report, with total revenue reaching 131.87 billion yuan, a 2.5% year-on-year increase, while net profit dropped by 20.3% to 2.08 billion yuan [2][7] - Cheng Jie, who has a strong background within the company, is expected to leverage his experience to navigate the current challenges and drive innovation and growth [4][19] Company Performance - China Resources Pharmaceutical's revenue has shown steady growth, increasing from 232.20 billion yuan in 2022 to 257.67 billion yuan in 2024, with an average annual growth rate of over 5% [7] - However, net profit has fluctuated, with a 13.06% decline in 2024 to 3.35 billion yuan and a further drop of 20.25% in the first half of 2025 [7][8] - The decline in profit is attributed to one-time impairment losses and rigid expense growth, with a net loss of 1.09 billion yuan in other income and losses reported for the first half of 2025 [7][8] Strategic Initiatives - The company has been actively pursuing mergers and acquisitions, with significant transactions including the acquisition of 100% of Green Cross Hong Kong for 1.82 billion yuan and a 28% stake in Tian Shi Li Pharmaceutical for 6.21 billion yuan [9][10] - Despite the expansion through acquisitions, the company is now shifting focus towards optimizing its asset structure by divesting non-core and loss-making businesses to enhance operational efficiency and profitability [10][15] - Cheng Jie is tasked with balancing the expansion from acquisitions with the need for profit growth, as well as addressing potential impairment risks associated with goodwill from these acquisitions [11][19] Industry Context - The Chinese pharmaceutical distribution market is experiencing maturation and differentiation, presenting structural opportunities for leading companies like China Resources Pharmaceutical [12] - Collaborations with multinational pharmaceutical companies are increasing, as these companies seek to focus on core products and leverage local distribution expertise [12][13] - The industry is transitioning from a phase of scale expansion to one of high-quality development, emphasizing the need for new products, channels, and innovative service models [14][15] Innovation and R&D - China Resources Pharmaceutical is enhancing its pharmaceutical business through initiatives such as establishing a 1 billion yuan investment fund focused on innovative drugs and high-end medical devices [17] - The company is also pursuing partnerships for innovative drug development, such as a collaboration with Nanjing Ai Er Pu for a heart failure treatment [17][19] - However, the company faces challenges in its R&D efforts, with a significant portion of its pipeline still focused on generic drugs rather than innovative products, which may hinder its competitive edge in a rapidly evolving market [18][19]

Core Viewpoint - The Chinese medicine sector shows resilience with the Chinese Medicine ETF (560080) rising by 0.28% despite market fluctuations, indicating strong investor interest and a net inflow of over 220 million yuan in the past 10 days [1][3]. Market Performance - The Chinese Medicine ETF (560080) has maintained a premium, closing with a premium rate of 0.14%, and has seen a total trading volume exceeding 1 billion yuan [1]. - Major stocks within the ETF, such as Dong'e Ejiao and Yunnan Baiyao, have shown positive performance, with Dong'e Ejiao increasing by over 1% [3][4]. Index Performance - The Chinese medicine index has experienced a negative return of -2.86% year-to-date, with a decline of 8.13% projected for 2024 [4]. - The index has shown a pattern of alternating performance, with three consecutive years of gains from 2019 to 2021, followed by three years of declines from 2016 to 2018 [4]. Valuation Metrics - The TTM price-to-earnings ratio for the Chinese Medicine ETF (560080) stands at 24.86, placing it at the 20.6% percentile of the past decade, suggesting a favorable valuation [6]. Financing and Investment Trends - Leveraged funds are increasingly utilizing the ETF for exposure to the higher-value Chinese medicine consumer sector, with the latest financing balance exceeding 91 million yuan, maintaining historical highs [7]. - The overall sentiment in the Chinese medicine sector is expected to improve, driven by stable market demand and accelerated innovation [9]. Future Outlook - The Chinese medicine sector is anticipated to benefit from innovation and transformation, with a focus on new product development and cost reductions in raw materials [9][10]. - The sector is positioned to leverage its advantages in preventive healthcare and as a complementary treatment alongside Western medicine [10]. Corporate Governance and Incentives - Recent corporate governance improvements and incentive plans in state-owned enterprises are expected to drive growth in the Chinese medicine sector, with companies like Huaren Sanjiu and Jiangzhong Pharmaceutical implementing effective incentive programs [11][12]. Dividend Yield - Several Chinese medicine companies are projected to have dividend yields exceeding 3% in 2024, with state-owned enterprises leading in this regard, indicating strong cash flow and shareholder returns [13][14].

Core Viewpoint - The Chinese Medicine ETF (560080) has shown resilience despite a recent market downturn, with significant capital inflow and a leading position in its category [1][7]. Market Performance - The Chinese Medicine ETF (560080) experienced a nearly 1% decline after a significant opening drop, with a total trading volume exceeding 110 million yuan [1]. - The ETF has seen a net inflow of over 170 million yuan in the last 10 days, bringing its total size to nearly 2.4 billion yuan, leading its peers [1]. Component Stocks - Most component stocks of the Chinese Medicine ETF (560080) closed in the red, with notable declines including Jilin Aodong (-1.44%), Yunnan Baiyao (-1.01%), and Dong'e Ejiao (-1.22%) [3][4]. Yearly Index Performance - The Chinese Medicine Index has shown negative returns year-to-date, with a decline of 3.27% this year and an 8.13% drop in 2024, marking a four-year streak of negative annual performance [4]. Valuation Metrics - The TTM price-to-earnings ratio for the Chinese Medicine ETF (560080) stands at 25.11, which is at the 22.28% percentile of the past decade, indicating a more favorable valuation [6]. Leverage and Financing - Financing activities remain robust, with the latest financing balance for the ETF exceeding 84 million yuan, maintaining historical highs [7]. Industry Outlook - According to CITIC Securities, channel adjustments in the Chinese medicine sector are nearing completion, with expectations for demand recovery in the fourth quarter [9]. - The demand for traditional Chinese medicine products is anticipated to stabilize, with a gradual recovery expected as external pressures ease [9]. New Drug Developments - The number of new drug applications in the Chinese medicine sector is on the rise, with 92 new IND applications and 42 NDA applications reported in the first nine months of 2025 [10][12]. - Recent approvals for new drugs from companies like Fangsheng Pharmaceutical and Tianzhihui are expected to contribute positively to their growth [12].