Investment Rating - The report maintains an "Accumulate" rating for the industry [5] Core Insights - The pharmaceutical and biotechnology industry is expected to experience a turning point and growth resonance, with a focus on the resilience of the raw material drug sector amidst various macro and micro factors [7][10] - The industry is characterized by a significant number of listed companies, totaling 494, with a total market value of 77,409.20 billion and a circulating market value of 70,487.38 billion [2] Summary by Sections Industry Overview - The report analyzes 47 representative raw material drug companies, indicating that despite pressures on revenue, the profit margins are showing improvement, reflecting the industry's resilience [10] - The average revenue growth rate for the 47 companies in the first half of 2025 was -5.38%, while the average growth rate of non-recurring net profit was 14.43% [10][12] Financial Performance - Key companies such as Xinhecheng, Aoruite, Tianyu Co., Meinuohua, and others have achieved over 10% growth in revenue and non-recurring net profit [10] - The report highlights that the non-recurring net profit of Xinhecheng increased significantly by 70.50% year-on-year in the first half of 2025 [10] Market Trends - The report notes that the prices of major raw materials are currently at low levels, particularly for certain categories like sartans and heparins, with expectations for gradual price recovery as excess capacity is cleared [7][10] - The investment strategy for the second half of the year focuses on identifying companies that are at a turning point in their existing business while also exploring new growth opportunities [7][10] Company Recommendations - The report suggests focusing on companies such as Tianyu Co., Sitaly, Tonghe Pharmaceutical, Meinuohua, Xianju Pharmaceutical, and Puluo Pharmaceutical for potential investment opportunities [7][10]

Core Insights - The raw material pharmaceutical industry in China is undergoing a transformative period amid global restructuring, focusing on enhancing international competitiveness through innovation and global collaboration [1][5]. Export Performance - China has become the world's largest producer and exporter of raw pharmaceuticals, with export value increasing from $23.55 billion in 2015 to $42.98 billion in 2024, reflecting a compound annual growth rate (CAGR) of 7.7% [2]. - The total export volume of raw pharmaceuticals has also shown stable growth, with a CAGR of 9.0% during the same period [2]. - In the first half of 2025, both imports and exports of Western medicine raw materials from China experienced year-on-year growth [2]. Challenges in Internationalization - Despite strong export performance, challenges remain in the internationalization process, including global supply chain restructuring, increasing international trade friction, and intensified market competition [2]. - The uncertainty of global tariff policies poses potential pressure on export-dependent companies [2]. Impact of Indian Market - India, as the third-largest importer of raw pharmaceuticals, sources 68.8% of its imports from China, while also competing directly with China as the second-largest exporter [3]. - India's Production Linked Incentive (PLI) scheme supports local production of 53 raw pharmaceuticals, which may pressure Chinese companies' pricing power and profit margins [3]. - Stricter registration management and extended approval cycles in India increase export costs for Chinese firms [3]. Structural Issues in Domestic Industry - Structural overcapacity in China's raw pharmaceutical industry has led to price competition, further squeezing profit margins [4]. - Domestic companies have focused on traditional areas like vitamins and antibiotics, leading to saturation and intense competition, while high-value specialty raw pharmaceuticals remain underdeveloped [4]. Path to High-Quality Development - The industry needs to shift from cost competition to enhancing technological barriers as a foundation for international market presence [5]. - Emphasizing innovation in technology, processes, and materials is crucial for meeting international demand for high-quality raw pharmaceuticals [6]. - Targeting high-growth areas such as oncology, metabolic diseases, and neurological disorders is essential for building a differentiated competitive advantage [6]. Market Diversification Strategies - To mitigate external challenges, companies should reduce reliance on single markets and actively explore emerging markets [6]. - In the first five months of 2025, exports to Belt and Road Initiative countries reached $7.75 billion, a year-on-year increase of 4.2%, indicating significant market potential in Southeast Asia, the Middle East, and Latin America [6]. - Companies are encouraged to avoid over-dependence on single products or markets and to strategically incorporate emerging markets into their plans [6]. Collaborative Approaches - The overall production cost of Chinese raw pharmaceuticals is 20% to 30% lower than that of India, which remains a competitive advantage [7]. - Companies should transition from traditional trade to deep industry collaboration, such as supplying key intermediates to Indian firms and co-developing specialty raw pharmaceuticals [7].