Haitong Securities International·2025-06-03 09:28Investment Rating - The report assigns an "Overweight" rating to the pharmaceutical industry, specifically for pharmaceutical manufacturing and pharmaceutical services [1][2]. Core Insights - Continuous attention is recommended for innovative drugs with rising prosperity, as evidenced by the record number of 73 oral reports on Chinese innovative drug assets at the 2025 ASCO annual meeting [2][36]. - The Chinese innovative drug sector is experiencing a significant demand from multinational corporations (MNCs), which is reflected in the increasing number of overseas business development (BD) transactions [36]. - The pharmaceutical sector outperformed the market in May 2025, with the SW Pharmaceutical and Biological sector rising by 6.4%, ranking first among Shenwan's primary industries [15][37]. Summary by Sections Investment Highlights - The report highlights a portfolio of A-Shares including Jiangsu Heng Rui Medicine, Huadong Medicine, Sichuan Kelun Pharmaceutical, and others, indicating a focus on companies with strong growth potential [2][5]. - The report notes that the pharmaceutical sector's premium level relative to all A-Shares is currently at a normal level, with a relative premium rate of 87.88% as of the end of May 2025 [28][37]. Performance Analysis - In May 2025, the pharmaceutical sector's performance was ranked first, with individual stock gains led by Staidson Beijing BioPharmaceuticals (+145.4%) and Sunshine Guojian Pharmaceutical (+99.4%) [15][37]. - The report also details the performance of the Hong Kong and U.S. pharmaceutical sectors, noting that the Hong Kong stock pharmaceutical sector outperformed the market while the U.S. sector underperformed [38]. Market Trends - The report emphasizes the upward trend in the innovative drug market, with traditional pharmaceutical companies emerging from centralized procurement challenges and entering a phase of profitability [36]. - The report indicates that the biopharmaceutical sector's sub-sectors, such as chemical raw materials and biological products, have shown strong performance, with increases of 10.5% and 7.3% respectively [20][37].