Core Viewpoint - The integration of traditional Chinese medicine (TCM) with modern technology is driving innovation in the Chinese medicine manufacturing industry, exemplified by Kangyuan Pharmaceutical's efforts to modernize ancient formulas for contemporary clinical use [1][2][10]. Group 1: Innovation in Manufacturing - Kangyuan Pharmaceutical has established a fully automated production line that utilizes smart robotics and AI algorithms to optimize production processes, enhancing efficiency and quality control [2][6]. - The company has developed a unique quality control system centered around effective components, significantly increasing the number of monitored quality indicators from 3-5 to 30-50 [3][5]. - Kangyuan has created the first AI-driven pharmaceutical process knowledge system, marking a breakthrough in intelligent manufacturing for traditional Chinese medicine [6][10]. Group 2: Research and Development - The company focuses on transforming classic formulas from ancient texts like "Shang Han Lun" and "Jin Gui Yao Lue" using modern omics technologies, resulting in a knowledge graph with 120,000 ancient formula data entries [3][4]. - Kangyuan has achieved notable success in new drug approvals, with 59 traditional Chinese medicine new drugs and 6 approved in the last five years, leading the industry in innovation [3][4]. - The company emphasizes a clinical value-oriented approach, ensuring that new drug development is closely tied to clinical efficacy and safety [8][9]. Group 3: Talent and Collaboration - Kangyuan has built a strong research team of over 700 high-level talents, including several recognized experts and scholars, to drive innovation in traditional Chinese medicine [9]. - The company has established a collaborative ecosystem involving national and provincial research platforms to enhance innovation and technological upgrades across the industry [7][10]. - Kangyuan's commitment to talent development is evident through various training programs and recognition received for its research initiatives [9].

Core Viewpoint - The Chinese medicine sector is experiencing a positive trend, with the Zhongzheng Traditional Chinese Medicine Index showing an increase, driven by policy benefits and the rapid modernization of classic formulas into contemporary medicine [1][2]. Group 1: Market Performance - As of November 12, 2025, the Zhongzheng Traditional Chinese Medicine Index (930641) rose by 0.57%, with notable increases in constituent stocks such as Zhongsheng Pharmaceutical (002317) up by 10.02% and Panlong Pharmaceutical (002864) up by 10.00% [1]. - The Chinese Medicine ETF (159647) also saw a rise of 0.29%, marking its sixth consecutive increase, with the latest price reported at 1.05 yuan [1]. Group 2: Industry Trends - There is a continuous release of policy benefits, leading to an accelerated layout of classic formulas by Chinese medicine companies, with products like Loquat Lung Cleansing Granules and Warming Meridian Decoction being rapidly transformed into modern formulations [1]. - Guojin Securities identifies the main investment opportunities in the pharmaceutical sector for 2025 as the innovation drug theme and the reversal of challenges in the left-side sector, emphasizing the potential of dual/multi-antibody drugs and addressing unmet clinical needs in chronic disease medications [1]. Group 3: Index Composition - The Zhongzheng Traditional Chinese Medicine Index includes companies involved in the production and sales of traditional Chinese medicine, with the top ten weighted stocks accounting for 54.92% of the index as of October 31, 2025 [2].