Xiangcai Securities·2025-06-20 02:58Industry Overview - The Chinese medicine sector experienced a decline of 0.32% last week, while the overall pharmaceutical sector showed mixed performance with a 1.4% increase in the pharmaceutical and biological index [3][4] - The performance of the Chinese medicine sector is relatively weak compared to other pharmaceutical sub-sectors, with chemical pharmaceuticals showing the best performance with a 3.53% increase [3][4] Company Performance - Top-performing companies in the Chinese medicine sector include Kanghui Pharmaceutical, Enwei Pharmaceutical, Kangyuan Pharmaceutical, Zhongsheng Pharmaceutical, and Zhendong Pharmaceutical [4] - Underperforming companies include Wanbangde, Longjin Retreat, Biological Valley, Guangyuyuan, and Jiu Zhitang [4] Valuation Metrics - The price-to-earnings (PE) ratio for the Chinese medicine sector is 27.68X, reflecting a decrease of 0.1X week-on-week, with a one-year maximum of 30.13X and a minimum of 22.58X [5] - The price-to-book (PB) ratio stands at 2.29X, down 0.01X from the previous week, with a one-year maximum of 2.65X and a minimum of 1.99X [5] - The current PE is at the 29.83% percentile since 2013, while the PB is at the 5.56% percentile during the same period [6] Raw Material Market - The market for raw Chinese medicinal materials is under pressure, with a total index price of 241.57 points, reflecting a 0.7% decrease week-on-week [7] - Among the twelve categories of medicinal materials, five categories saw price increases while seven experienced declines, with the plant leaf category showing the largest drop [7] Policy and Market Dynamics - The third batch of national collection for traditional Chinese medicine began implementation in April 2025, with at least 19 provinces releasing results [8] - The collection involves 20 product groups and 95 products, with 174 selected drugs, indicating a trend towards price rationalization in the sector [8] - There is a need for further optimization of selection rules due to insufficient completion rates in local collections [8] Investment Recommendations - The report maintains an "overweight" rating for the industry, suggesting three main investment themes: price governance, consumption recovery, and state-owned enterprise reform [9][10][11] - Price governance focuses on the impact of collection and negotiation on drug prices, with a recommendation to pay attention to companies with strong R&D capabilities and unique products [9] - Consumption recovery is driven by macroeconomic improvement and aging population, favoring companies with brand and material advantages [10] - State-owned enterprise reform presents opportunities for performance improvement and efficiency gains in the Chinese medicine sector [11] - Recommended investment targets include Zoli Pharmaceutical, Pian Zai Huang, and Shou Xian Gu, which are expected to benefit from these trends [11]