Core Viewpoint - The pharmaceutical industry is experiencing a rebound driven by technological advancements, particularly in innovative drugs and AI healthcare, marking the best start to the year in nearly four years [1][2]. Group 1: Industry Recovery and Investment Opportunities - The pharmaceutical sector is believed to be in a structural bottoming phase, with many companies emerging from a prolonged downturn, indicating a potential recovery [1][2]. - The AI healthcare and innovative drug sectors are identified as the two core investment tracks for the future, supported by their dual attributes of innovation and technology [6][7]. - The recent strong performance of the pharmaceutical sector, with Hong Kong and A-share innovative drug indices rising over 36% and 15% respectively since January 13, highlights the sector's recovery potential [1]. Group 2: Driving Factors for the Pharmaceutical Sector - Four key factors are driving the anticipated turning point in the pharmaceutical industry: technological advancements, policy effects, internationalization of innovative drugs, and increasing institutional interest [3][4][5]. - Technological advancements, particularly in AI applications for drug development and healthcare, are significantly enhancing market sentiment and investment opportunities [3][4]. - Policy reforms aimed at improving the efficiency of medical insurance funds and promoting high-quality development in the pharmaceutical sector are beginning to yield positive results [4][5]. Group 3: Market Dynamics and Valuation - The internationalization of innovative drugs is accelerating, with over $12.6 billion in License-out transactions reported this year, indicating strong growth potential [5]. - The valuation of innovative drugs is supported by their increasing international presence and ongoing research and development efforts, which are expected to yield new market opportunities [5][6]. - The focus on innovative drugs and AI healthcare is expected to continue, with the potential for significant revenue growth as these sectors mature [6][7]. Group 4: Investment Strategy and Research Approach - The company emphasizes a systematic investment approach, focusing on deep research, long-term perspectives, and broad coverage of the pharmaceutical sector to identify value [9][10]. - The investment team consists of experienced professionals dedicated to thorough analysis and understanding of industry trends, company governance, and business models [9][10]. - The current market conditions present a favorable opportunity for investment in the pharmaceutical sector, particularly in innovative drugs and AI healthcare, despite the inherent challenges [8][11].

Core Points - The CSI All Share Healthcare Index increased by 0.05%, closing at 8642.42 points with a trading volume of 48.652 billion [1] - Over the past month, the index has risen by 0.21%, while it has decreased by 0.61% over the last three months and increased by 1.70% year-to-date [1] - The index is designed to reflect the overall performance of different industry companies within the CSI All Share Index, categorized into various levels of industries [1] Index Composition - The top ten weighted stocks in the CSI All Share Healthcare Index include: Heng Rui Medicine (6.67%), WuXi AppTec (5.32%), Mindray Medical (4.71%), Aier Eye Hospital (2.04%), Pian Zai Huang (2.0%), United Imaging Healthcare (1.66%), Yunnan Baiyao (1.6%), Kelun Pharmaceutical (1.27%), New Horizon (1.09%), and Shanghai Raist (1.03%) [1] - The market share of the index's holdings is distributed as follows: Shanghai Stock Exchange 50.92%, Shenzhen Stock Exchange 49.04%, and Beijing Stock Exchange 0.04% [2] - The index is composed entirely of the healthcare sector, with a 100% allocation to healthcare [2] Index Adjustment Mechanism - The index samples are adjusted biannually, with adjustments occurring on the next trading day after the second Friday of June and December [2] - Weight factors are generally fixed until the next scheduled adjustment, with temporary adjustments made in response to changes in the CSI All Share Index [2] - Special events affecting sample companies may lead to corresponding adjustments in the index, including delisting or corporate actions such as mergers and acquisitions [2]

Core Viewpoint - The article discusses the complexities and investment opportunities within the pharmaceutical sector, highlighting the numerous indices available for investors to consider [2][3][17]. Summary by Sections Overview of Pharmaceutical Indices - There are a total of 27 pharmaceutical industry or thematic indices tracked by funds, divided into 12 broad-based indices and 15 thematic indices [2][3]. Traditional Pharmaceutical Indices - Traditional indices include major A-share indices that require profitability for listing, such as: - CSI All Pharmaceutical Index (000991): Covers the entire industry chain, including chemical pharmaceuticals, medical devices, and services [7]. - CSI Pharmaceutical Health Index (000933): Strong industry representation, covering leading companies across the industry chain [7]. - National Pharmaceutical Industry Index (399394): Focuses on 80 prominent stocks in the A-share market [7]. - CSI Pharmaceutical 50 Index (931140): Selects 50 leading pharmaceutical stocks emphasizing R&D investment and market share [8] [9]. Emerging Pharmaceutical Indices - Emerging indices focus on innovative drugs, medical themes, and biotechnology, including: - CSI Innovative Drug Industry Index (931152): Concentrates on companies developing innovative drugs [10]. - National Biopharmaceutical Index (399441): Targets high-growth companies in the biopharmaceutical innovation sector [10]. - CSI Medical Index (399989): Comprises medical devices and services, benefiting from new medical infrastructure and domestic replacements [11]. Current Valuation Levels - As of March 18, 2025, the price-to-earnings (PE) ratios of 12 pharmaceutical indices indicate that most are below their historical averages, suggesting they are not overvalued. Five indices are considered "normal undervalued" while four are "undervalued" [14][15]. Investment Strategies - The article suggests that investors may consider focusing on emerging indices for higher return potential, albeit with greater volatility. Conversely, conservative investors might prefer traditional indices, which also include exposure to emerging sectors [17][18]. - Actively managed pharmaceutical thematic funds have historically outperformed during bull markets and have shown resilience during bear markets, making them a viable option for investors [19].

Investment Rating - The report does not specify a clear investment rating for the company [1][6]. Core Views - The company's performance in 2024 met expectations, with a total revenue of 28.1 billion yuan, a year-on-year decrease of 10.5%, and a net profit attributable to the parent company of 10.5 billion yuan, an increase of 31.3% [6][9]. - The sales of the main product, New Huo Su, experienced a decline, with a total sales revenue of 24.3 billion yuan, down 13.6% year-on-year [6][9]. - The company plans to continue high cash dividends, proposing a cash dividend of 0.728 yuan per share, totaling 630 million yuan, which accounts for 60% of the net profit attributable to shareholders [6][9]. Summary by Sections Financial Performance - Revenue for 2024 was 28.1 billion yuan, with a growth rate of -10.45% [2][9]. - Net profit attributable to the parent company was 10.5 billion yuan, with a growth rate of 31.26% [2][9]. - Earnings per share (EPS) for 2024 was 3.26 yuan [2][9]. - The return on equity (ROE) was 26.75% [2][9]. Future Projections - Revenue projections for 2025-2027 are 29.6 billion yuan, 33.2 billion yuan, and 37.3 billion yuan, respectively, with growth rates of 5.56%, 12.14%, and 12.26% [2][9]. - Net profit projections for 2025-2027 are 9.4 billion yuan, 10.5 billion yuan, and 11.3 billion yuan, respectively [6][9]. Product Sales Forecast - New Huo Su sales are projected to be 25.1 billion yuan in 2025, with a growth rate of 3% [8][9]. - Other product sales are expected to grow significantly, with projections of 452.8 million yuan in 2025, reflecting a growth rate of 21.1% [8][9]. Cost and Profitability - The gross profit margin for 2024 was 94.2%, with a slight decrease expected in the following years [6][9]. - The company aims to control the cost ratio to within 70% for 2025 [6][9].