Investment Rating - The report assigns an "Overweight" rating to the pharmaceutical and biotechnology industry, indicating that the industry index is expected to outperform the CSI 300 index by 10% or more over the next six months [2][37]. Core Insights - The pharmaceutical and biotechnology sector saw an overall increase of 2.21% in the week from May 26 to May 30, ranking second among 31 industries in the Shenwan index and outperforming the CSI 300 index by 3.29 percentage points. Year-to-date, the sector has risen by 6.61%, ranking sixth among the 31 industries and outperforming the CSI 300 index by 9.02 percentage points [4][13][15]. - The current PE valuation for the pharmaceutical and biotechnology sector is 27.98 times, which is at the historical median level, with a valuation premium of 137% compared to the CSI 300 index. The top three sub-sectors in terms of growth are chemical pharmaceuticals, biological products, and medical services, with increases of 3.83%, 3.14%, and 2.46% respectively [4][22][15]. - A total of 373 stocks (77.9%) in the sector rose last week, while 97 stocks (20.3%) declined. The top five gainers were Shuyou Shen (60.41%), Huason Pharmaceutical (41.97%), Changshan Pharmaceutical (35.91%), Huana Pharmaceutical (32.62%), and Yifang Biological (30.51%) [4][27]. Market Performance - The pharmaceutical and biotechnology sector's performance is highlighted by the approval of 11 innovative drugs by the National Medical Products Administration (NMPA) on May 29, which enhances treatment options for patients and showcases the increasing innovation capability of China's pharmaceutical industry [5][29]. - The 2025 American Society of Clinical Oncology (ASCO) annual meeting showcased several domestic innovative drug projects, indicating that local companies are gaining international recognition for their innovative capabilities [5][32]. Investment Recommendations - The report suggests focusing on the innovative drug sector as it is the most certain and leading sub-sector within the pharmaceutical and biotechnology industry. Additionally, it recommends exploring investment opportunities in medical devices, traditional Chinese medicine, chain pharmacies, and medical services [6][35]. - Recommended stocks include Beida Pharmaceutical, Te Bao Biological, Qianhong Pharmaceutical, Ling Rui Pharmaceutical, and Lao Bai Xing. Stocks to watch include Kelong Pharmaceutical, Rongchang Biological, Kaili Medical, Huaxia Eye Hospital, and Baipu Sais [6][35].

Group 1: Key Recommendations - The report highlights Vanadium Titanium Co., Ltd. (000629) as a key recommendation, indicating that high-end production capacity is being gradually released, suggesting an impending profit turning point [8] - The report notes that the company achieved a revenue of 13.209 billion yuan in 2024, a year-on-year decrease of 8.1%, and a net profit attributable to shareholders of 285 million yuan, down 73.0% year-on-year [8][9] - The report emphasizes the structural changes in downstream demand, with an increase in vanadium demand in non-steel applications, particularly in energy storage [9] Group 2: Industry Insights - The vanadium market is currently experiencing an oversupply, with the average market price of vanadium pentoxide in 2024 at approximately 80,500 yuan per ton, a year-on-year decrease of 25.9% [9] - The titanium dioxide market is also facing oversupply due to weak demand in downstream sectors such as real estate and coatings, with the company’s titanium dioxide revenue in 2024 reaching 3.517 billion yuan, a year-on-year increase of 2.5% [10] - The report forecasts that the company plans to produce 52,500 tons of vanadium products and 22,550 tons of sulfuric acid titanium dioxide in 2025, indicating a focus on expanding production capacity [11] Group 3: Market Performance - The pharmaceutical and biotechnology sector saw an overall increase of 0.98% in the last week, outperforming the CSI 300 index by 0.97 percentage points [12] - The report indicates that the PE valuation for the pharmaceutical and biotechnology sector is currently at 27.11 times, which is at a historically low level [12] - The report suggests that the recent performance of innovative drugs has been strong, with several companies reporting excellent earnings data [14]