Investment Rating - The industry investment rating is "Strongly Outperform" [1] Core Insights - The pharmaceutical sector shows continuous improvement signals in performance for 2024 and Q1 2025, with overall profitability on the rise. Despite short-term pressures, segments like chemical pharmaceuticals and medical consumables are performing well. The sector's valuation remains at historical lows, indicating significant upside potential [3][23][26] Summary by Sections 1. Performance Review for 2024-2025 Q1 - The pharmaceutical sector's overall revenue growth rates declined by 1% and 4.3% respectively for 2024 and Q1 2025, with net profit growth rates down by 13.1% and 9.2%. The decline is attributed to medical restructuring and price reductions from centralized procurement [7][19] - Despite the challenges, segments such as chemical pharmaceuticals and raw materials have shown resilience, benefiting from policy support and rising raw material prices [18] 2. Innovative Drug Industry Chain - The innovative drug sector is supported by comprehensive policies, with a notable acceleration in commercialization. The recovery in overseas investment and demand is evident, leading to improved order growth for CXO and upstream companies [3][29] - The sector is expected to see high growth in 2024, particularly in oncology, autoimmune diseases, weight loss, Alzheimer's, NASH, hair loss, and hepatitis B [3][29] 3. Traditional Chinese Medicine and Medical Services - The out-of-hospital consumption sector, including pharmacies and OTC, is anticipated to recover from inventory issues and weak consumption, with growth expected in 2025. The sector is also witnessing a wave of mergers and acquisitions led by state-owned enterprises [3][29] 4. Medical Devices - The medical device sector faced revenue and profit growth pressures in 2024 due to hospital restructuring and procurement delays. However, with the easing of these pressures, a rebound is expected in 2025, particularly in domestic replacements and AI+medical applications [3][29] 5. Beneficiary Stocks - Recommended stocks include Aladdin, Kanglong Chemical, Rongchang Bio, Nocare, Maipu Medical, Yihua Jiaye, MicroPort Scientific, Yirui Technology, Yifeng Pharmacy, Dazhenglin, and Meinian Health [3][29] 6. Fund Allocation - The public fund allocation in the pharmaceutical sector is at a historical low of 9.2% in Q1 2025, down from 13.7% at the end of 2023. This is expected to reverse as the impact of medical anti-corruption fades and policy support increases [26][27]

Core Viewpoint - The domestic pharmaceutical industry is experiencing a slowdown in investment and financing, leading to a gradual decline in market demand growth, which is impacting the CXO sector, resulting in intensified competition and challenges for development [1] Summary by Category Industry Overview - In Q1 2025, among 29 listed CXO companies, five, including WuXi AppTec and Kanglong Chemical, reported revenues exceeding 1 billion yuan, indicating a mixed performance across the sector [1][2] - 17 companies achieved year-on-year revenue growth, while 12 companies saw declines ranging from 0.6% to 40.32% [1] Financial Performance - WuXi AppTec led the sector with a net profit of 3.672 billion yuan, followed by Kailai Ying and Kanglong Chemical with approximately 300 million yuan each; however, eight companies, including Nanmo Bio and Boteng Co., reported losses [1][2] - Year-on-year, 18 companies saw net profit growth, while 11 experienced declines, with the largest drop reaching 431.11% [1] Market Dynamics - The international business is becoming a focal point for domestic CXO companies, with WuXi AppTec reporting 6.38 billion yuan in revenue from U.S. clients, a 28.4% increase, while revenue from Chinese clients decreased by 1.3% [3][4] - Kanglong Chemical's revenue from North American clients was 2.003 billion yuan, up 16.81%, indicating a strong focus on the North American market despite global trade uncertainties [4] Growth Opportunities - The CXO industry is expected to benefit from increased R&D investments and outsourcing penetration, with predictions indicating that by 2030, the scale of drug R&D and production outsourcing services in China could reach 482.3 billion yuan [5][6] - Companies like Kanglong Chemical reported a more than 10% increase in new order amounts in Q1 2025, reflecting a positive trend in order reserves [6] Competitive Landscape - The performance of leading companies is showing significant differentiation, with some like WuXi AppTec experiencing substantial order growth, while others like Tigermed are facing challenges [3][7] - Despite pressures, Tigermed reported a 20% increase in new contract amounts, indicating resilience in securing new business [7] Future Outlook - The CXO sector is transitioning from a focus on cost advantages to a dual barrier of technology and globalization, with companies expected to enhance their positions in the market as they convert order reserves into revenue [8]

Group 1 - The pharmaceutical sector is a key focus for institutional investors, with brokers increasing their investments and research efforts in this area [1] - As of the end of Q1, 14 brokerage firms were among the top ten shareholders of 25 pharmaceutical companies, holding a total of 508 million shares valued at 4.118 billion [1] - In Q1, brokers frequently adjusted their holdings in the pharmaceutical sector, initiating positions in 10 stocks, increasing holdings in 3, and reducing holdings in 11 [1][2] Group 2 - New positions taken by brokers in Q1 included 1.162 billion for Yihe Jiaye and 1.13 billion for Borui Pharmaceutical, with significant holdings also in Jia Ying Pharmaceutical and Chuangguang Medical [2] - Brokers have been actively conducting on-site research to gather firsthand information about the pharmaceutical sector, with over 50 brokers focusing on companies like Aibo Medical and Wanjian Medical [2] - A total of 23 pharmaceutical stocks have been recommended by brokers this month, with notable mentions including Baiji Shenzhou and Heng Rui Pharmaceutical, indicating strong long-term growth prospects [3] Group 3 - The pharmaceutical sector is expected to see a recovery in profitability by 2025, with current PE valuations at historical lows, suggesting potential for excess returns compared to the broader market [3] - Analysts recommend focusing on high-growth, strong recovery, and new expectations for pharmaceutical investments in 2025, particularly in innovative drugs and medical devices [4] - Investment strategies should prioritize companies with significant product advantages and healthy balance sheets, especially those with global sales potential [4]

Core Viewpoint - The Hang Seng Healthcare Index has shown positive performance, with significant increases in constituent stocks, indicating a potential recovery in the healthcare sector [1][3]. Group 1: Index Performance - As of May 9, 2025, the Hang Seng Healthcare Index rose by 0.33%, with notable increases in stocks such as Zai Lab (+7.38%) and WuXi AppTec (+3.23%) [1]. - The Hang Seng Healthcare Index ETF (159557) has increased by 16.06% over the past month, ranking first among comparable funds [1]. Group 2: Liquidity and Scale - The Hang Seng Healthcare Index ETF recorded a turnover rate of 4.41% with a transaction volume of 11.35 million yuan [3]. - The ETF's latest scale reached 260 million yuan, marking a one-year high, with shares totaling 215 million, also a one-month high [3]. Group 3: Valuation Insights - The latest price-to-earnings ratio (PE-TTM) for the Hang Seng Healthcare Index ETF is 23.83, which is in the 4.36% percentile over the past year, indicating a valuation lower than 95.64% of the time in the last year [3]. Group 4: Market Outlook - China Galaxy Securities notes that the pharmaceutical sector has undergone a prolonged adjustment, resulting in low overall valuations and underweight public holdings. The policy support for commercial insurance development in 2025 is expected to improve payment conditions marginally, benefiting innovative drugs and medical devices [3]. - The company anticipates a sustained recovery in the pharmaceutical market, with structural opportunities remaining, particularly in the innovative drug supply chain [3].

Group 1 - The innovative drug sector experienced a significant surge, with companies like Shuyou Shen rising over 15% and Hehua Co. hitting the daily limit, indicating strong market interest [1] - In Q1 2025, China's innovative drug License-out transactions were active, contributing significantly to global hot targets, supported by policy backing and AI empowerment [1] - The recent response from several pharmaceutical companies to tariff issues showed limited impact, while they are expanding into emerging markets [1] Group 2 - The proportion of heavy holdings in the pharmaceutical industry funds has rebounded in Q1 2025, although it remains below historical averages, with increases in chemical pharmaceuticals and medical services [1] - Long-term prospects suggest that companies with strong innovation capabilities and rich product pipelines will benefit from the ongoing procurement initiatives in drug consumables [1] - Investment opportunities are recommended in the innovative drug industry chain, high-end medical devices, and medical consumer terminals, focusing on undervalued quality targets [1] Group 3 - The capital market is influenced by domestic policy relaxation, trade easing, and geopolitical conflicts, leading to frequent hotspots [2] - Despite slow short-term demand growth in the essential consumer sector, the long-term asset revaluation logic in China remains valid, suggesting potential value after external shocks [2] - Investors are advised to focus on undervalued sub-industries, particularly in the beer and alcoholic beverage sectors, which present potential investment opportunities in the current market environment [2]

Group 1 - The Hong Kong stock market opened lower on May 8, with the Hang Seng Index down 0.45% and the Hang Seng Tech Index down 0.28%, while the Hong Kong Innovation Drug Index rose by 0.18% [1] - The Hong Kong Innovation Drug ETF (159567) opened higher and increased by 1.16%, with notable gains in component stocks such as Ascentage Pharma-B up over 3% and Lepu Biopharma-B up over 2% [1] - The Hong Kong Innovation Drug ETF closely tracks the Hong Kong Innovation Drug Index, which reflects the performance characteristics of biotechnology companies listed under the Hong Kong Stock Connect [1] Group 2 - According to Everbright Securities, the commercialization of domestic weight-loss drugs is imminent, and sales capabilities will be a significant factor in assessing future competitive advantages for companies [2] - China Galaxy Securities noted that the pharmaceutical sector has experienced a prolonged adjustment, with overall valuations at low levels and public fund holdings underweight, suggesting a potential recovery in the pharmaceutical market in 2025 [2] - Cinda Securities anticipates that the second quarter of 2025 may see catalysts for innovative drugs, including expected negotiations for medical insurance and the implementation of the Class B medical insurance directory [2]

Investment Rating - The report maintains a "Positive" investment rating for the pharmaceutical and biotechnology industry [8][29]. Core Insights - The industry is experiencing a return to normal growth, with a notable performance in chemical pharmaceuticals, while the overall revenue growth for 2024 is projected to decline by 0.6% year-on-year, marking the first decline in recent years [12][14]. - The report highlights a significant disparity among sectors, with chemical pharmaceuticals showing a remarkable net profit growth of 97.7%, while biological products face substantial short-term performance pressure [17][18]. - The current low allocation and valuation levels present a high cost-performance ratio for investments in the pharmaceutical sector, suggesting it is an excellent time to allocate resources [19][28]. Summary by Sections 1. Innovation in the Pharmaceutical Chain - The report notes that the impact of national procurement and anti-corruption measures is gradually diminishing, leading to a normal release of rigid demand in hospitals [11]. - The overall revenue growth for the industry in 2024 is projected at -0.6%, with net profit and non-recurring net profit declining by 8.1% and 5.9% respectively [12][13]. 2. Investment Recommendations - The report suggests focusing on the innovation drug supply chain (Biotech + CXO + upstream) and certain overseas medical devices, recommending companies such as Aosaikang, Yifang Bio, and WuXi AppTec for investment [29]. - For in-hospital products (traditional Chinese medicine, chemical pharmaceuticals, and medical devices), companies like Hengrui Medicine and Mindray Medical are highlighted as having more certain growth prospects [29]. 3. Market Positioning - The report indicates that the allocation of public fund products in pharmaceutical stocks has decreased from 11.2% in Q1 2024 to 8.7% in Q4 2024, with a slight recovery to 9.1% by Q1 2025 [19][21]. - The pharmaceutical sector's price-to-earnings ratio is at a 10-year low, suggesting potential for growth as innovative products continue to emerge [22][24].

Group 1 - The Hong Kong innovative drug sector showed strength with the Hong Kong Innovative Drug ETF (159567) rising over 1.20% and trading volume exceeding 1 billion yuan, with a turnover rate above 8% [1] - Key stocks such as BeiGene rose over 6%, along with other companies like Rongchang Bio, CanSino Biologics, and CSPC Pharmaceutical [1] - The Hong Kong Innovative Drug ETF closely tracks the Hong Kong Stock Connect Innovative Drug Index (987018), reflecting the operational characteristics of listed biotech companies in Hong Kong [1] Group 2 - China Galaxy Securities reported that the pharmaceutical sector has undergone a prolonged adjustment, with overall valuations at low levels and public fund holdings underweight, indicating potential marginal improvement in payment under supportive policies for commercial insurance by 2025 [2] - The report suggests that the innovative drug and device sectors are likely to benefit, with a continuous recovery in the pharmaceutical market and structural opportunities remaining [2] - Huafu Securities noted that the first quarter revealed a consensus on increasing positions in innovative drugs, highlighting a significant bottom reversal trend in the pharmaceutical sector after four years of adjustment [2]

相关ETF方面，恒生医疗ETF（513060）高开高走，盘中大涨超5%，成交额放量突破6亿元，换手率超 5%，交投活跃。成分股中多数上涨，药明合联大涨超15%；三生制药涨超10%；科伦博泰生物涨超 9%；药明生物、方舟健客、药明康德跟涨，涨幅均超8%。 湘财证券指出，近期中美互加关税对医药行业扰动较大，但中国医药行业出口额相对较小且主要集中于 原料药、医疗设备、低值耗材等领域。而与医疗服务领域实验室研发外包相关公司有较多涉及到美国市 场业务，因此医药外包产业短期受互加关税影响情绪面或有扰动。但从产业链来看，国内医药外包服务 公司已成为全球医药产业链重要一环，对美国大药企提升研发效率将更多精力聚焦于后端药品研发制 造，实现医药工业生产及价值创造提供了支撑。因此，我们认为关税对CXO行业的基本面的影响预计 将可控，建议把握板块下跌带来的配置机会。 近期在国家鼓励创新大背景下创新药产业链表现活跃，虽然医药工业复苏仍有待验证，行业受医保控费 压力仍在，但多层次的支付体系正在建立，医疗需求的刚性将共同推动行业企稳回升，建议关注高成长 及预期改善两大方向，具体而言：（1）高成长：医药外包服务中的ADCCDMO、减肥药产业 ...

Group 1 - The market showed signs of recovery with the ChiNext index leading gains, driven by active capital and strong performance in the pharmaceutical sector, particularly in innovative drug stocks [1] - Heng Rui Medicine announced a licensing agreement with Merck for its oral small molecule inhibitor HRS-5346, which expands its international market presence and accelerates global R&D, enhancing confidence in the innovative drug sector [1] - China Galaxy noted that the pharmaceutical sector has experienced a long adjustment period, resulting in low overall valuations and public fund underweighting, but anticipates a recovery in the pharmaceutical market driven by policy support [2] Group 2 - The innovative drug industry and medical device exports are expected to benefit from policy support and growing market demand, with leading companies in niche sectors likely to stand out [2] - The recovery of pharmaceutical consumption is anticipated to gradually manifest with economic recovery and consumption upgrades [2] - Overall, the pharmaceutical sector presents structural opportunities that warrant close attention [2]