Golden track forever opportunity ...... This is the pharmaceutical plate once in the A shares left a mark. However, the wind rotates, unknowingly pharmaceutical stocks have been in the doldrums for more than a year, valuation and institutional ratios both hit a new low in nearly a decade, leading white horse stocks have also once hit a new low in the stage! However, the good news is that, after the triple bottom, part of the segmentation track is expected to usher in the recovery, pharmaceutical stocks also returned to the brokerage firms to focus on the ranks of recommended. So, it's time to get on the medicine number of this train?
Public equity funds pharmaceutical position ratio, has hit a nearly ten-year low since 2013! Moreover, the public fund of medicine configuration willingness to continue to slump has been more than a year! Pharmaceutical industry valuation has been less than 25 times, in the industry nearly a decade in the relatively low region.
Pharmaceuticals this former market competition for the gold track, since July 2021 continued to pull back, when has been labeled with a series of labels such as valuation bottom, institutional configuration bottom.
At the same time, the investment value of pharmaceutical stocks have been repeatedly recommended by brokers to public funds and other institutional investors.
Since April's rebound, the new energy momentum fierce, then who will become its successor, will be medicine? In the third quarter, the organization will increase the allocation of pharmaceutical stocks? We should be prepared to get on board?
Innovative Drugs ETF Stalwart by Misadventure
April 10, 2020, Yinhua Fund Innovative Drugs ETF was officially listed. On that day, it opened at 1.043 yuan, closed at 1.028 yuan, with a low of 1.021 yuan, and traded more than 1.2 billion yuan throughout the day.
Investor Lao Wang (a pseudonym), on the other hand, was a small test on that day, purchasing thousands of shares.
In Lao Wang's memory, when the medicine is the bull market, by many loyal fans called forever opportunity, when the market popular saying: if the pharmaceutical sector is the gold track of the A-share, then innovative drugs is the core assets of the gold track.
Not to be outdone, in the following four months, the innovative drug ETF transaction price on August 6 that year touched the highest point since the listing of 1.638 yuan. However, Wang did not choose to sell, medicine has always been a concentration camp of bull stocks, but also want to wait and see.
Wind data show that, as of August 10, 2022, 4860 A shares since the listing of the stock price rose ranked in the top fifteen stocks, *** appeared Yunnan Baiyao, Pientzehuang, Changchun High-tech and Hengrui Medicine four pharmaceutical stocks.
Perhaps the share bought is not much, Lao Wang gradually forgot the account of innovative drug ETF, by mistake, became a holdout of innovative drug ETF for more than two years.
As of Aug. 10, 2022, the closing price of the innovative drug ETF was $0.975, and Lao Wang has incurred a loss on this investment. However, in the face of the ongoing correction in pharma stocks since the second half of 2021, more than a year-long record-setting downturn cycle, and in the face of the fragile state of mind of current pharma stock holders, Lao Wang, who has ridden three waves of the roller coaster, is not worried.
In addition to the current popular track new energy, I think the long-term view of the pharmaceuticals are always sunrise industry, just now is not the wind mouth, Wang told reporters.
For the current innovative drugs, Rongtong health care fund manager Jiang Xiu Lei said in a telephone interview, innovative drugs before the market, institutional attention, mainly because we see that the drug companies have obvious output effect. However, later the market found that innovative drugs will also be affected by the health insurance negotiation price cuts, in addition, the market is also worried about the continuous research and development of innovative drugs, output capacity. Now the market is too pessimistic about innovative drugs, because innovative drugs from R & D to output, need time cost, but the results will always be there.
Boshi Fund equity investment three fund manager Zhang Hong said on WeChat, A-share investors are now experiencing the first complete innovative drug investment cycle. In the past, we believe that the innovative drug industry may not be cyclical, and will continue the momentum of rapid upward development. For example, China's accession to the ICH in 2017 also made us remain relatively optimistic about innovative drug investment. At that time, we predicted that China's innovative drugs would go global in 5-10 years.
In Zhang Hong's view, based on the above expectations, China's innovative drug investment has seen two development cycles, including the cycle on industry and the cycle on investment. The first is the industrial cycle, the rise of China's real innovative drugs need a process, and in the development process there are often various twists and turns. The second is the cycle of investment, given that the innovative drug market is expected to be good, resulting in a short-term bubble, the innovative drug market bubble reached its peak in 2020, and the innovative drug investment began to fall back in 2021, which led to a pessimistic market sentiment. In the state of domestic demand, innovative drug investment is still a big trend. It's just that innovative drugs are currently a cyclical growth stock that is experiencing a certain amount of pullback. Recently, the global innovative drug assets are shrinking, the U.S. stock innovative drugs have also undergone the largest pullback in history.
Public placement allocation of the proportion of pharmaceuticals has hit a new low in nearly a decade
Wind data show that in the first half of 2022, TMT, financial real estate and pharmaceuticals into the main list of active biased funds to reduce holdings. From the point of view of the magnitude of the reduction of holdings, medicine is second only to electronics, becoming the second position in the reduction list.
CITIC Securities pharmaceutical research team collated statistics show that as of the end of the second quarter of 2022, all the funds in the Chinese medicine stocks position accounted for 10.3%, year-on-year and chained down 4.58 percentage points, 1.53 percentage points. The proportion of positions in pharmaceutical stocks in thematic pharmaceutical funds was 96.95%; after deducting pharmaceutical funds, the proportion of positions in pharmaceutical stocks in the market as a whole was 6.03%, a year-on-year and quarter-on-quarter decline of 4.29 and 0.73 percentage points, the lowest point in history since 2013.
Industry Securities pharmaceutical research team previously wrote that, in retrospect, excluding the pharmaceutical fund's pharmaceutical stock positions in 2021Q4 fell to the bottom of the historical 10-year level, in 2022Q1 after relatively stable in Q2 ring further downward.
Undoubtedly, the above litany suggests that the pharma sector is overweight overall and underweight excluding pharma funds, well below the 2014 peak position of 20%.
Really, the brokerage side is reminding us that institutions are very under-allocated to pharmaceuticals. A public fund manager told reporters on the phone.
And CITIC Securities pharmaceutical research team's further research shows that the pharmaceutical sector fund position has reached the bottom of history, epidemic prevention and control background related hot areas with higher performance growth certainty of CXO, medical devices and medical services and other areas of the configuration is more concentrated, but the overall valuation of the pivot year-on-year has been moved down significantly, at the valuation in recent years at the bottom of the valuation.
From the point of view of individual stocks, the public fund of medicine positions continue to focus on the leading. 2022 the end of the second quarter, the number of public funds long position in medicine stocks for 207, compared with the end of the first quarter of 2022, a decrease of 41. 2022 at the end of the second quarter of the number of funds holding the most of the top three stocks: PharmaEssentia, Myriad Healthcare, Aier ophthalmology, the phenomenon of institutional embrace is still obvious, more than 100 funds The top three stocks with the largest market capitalization are: WuXi AppTec, Myriad Healthcare, and Aier Ophthalmology, and the rankings are consistent with the top three stocks with the largest number of funds; from the perspective of the proportion of shares held to the outstanding shares, the top three stocks at the end of the second quarter of 2022 with the largest proportion of shares held by funds to the outstanding shares are: Kyushu Pharmaceutical, Adoption Stocks and Tiger Pharmaceuticals. Companies with a large proportion of outstanding shares held by institutions are mostly industry leaders, as well as medium-sized enterprises that are less affected by changes in domestic policies and have a higher degree of internationalization.
Source: wind, CITIC Securities Research Department
At the same time, the choice to reduce the holdings of pharmaceutical stocks is not only public funds, the north of the funds also chose the same action. Research from the strategy team of Societe Generale Securities found that, in contrast to the second quarter, the active equity funds and northward funds on the various industries to add or subtract the proportion of the view, public equity and foreign capital have chosen to synchronize the reduction of positions in the pharmaceuticals, banking, electronics sector in the subsectors more.
Publicly funded pharmaceutical positions in the doldrums for more than 1 year
Public funds on the pharmaceutical stock configuration hit a new low, behind the continued downturn in pharmaceutical stocks.
Many institutions preferred by WuXi AppTec (SH603259, share price of 94.51 yuan, market value of 279.5 billion yuan), since July 1, 2021, the share price of 160 yuan/share above the staging of a one-day tour, opened a downward pattern, the lowest in mid-February this year, close to 80 yuan/share, the interval of the largest decline of more than 47%. As of August 11, 2022, the stock closed at 94.51 yuan per share.
100 billion vaccine leader Zhifei Biological (SZ300122, share price 99.02 yuan, market value of 158.4 billion yuan), had in 2020 less than a year and a half time soared 3.74 times, and May 17, 2021 plate once brushed a record high of 230.69 yuan / share. Now, despite a 6.55% jump on Aug. 11, the once-bullish stock closed that day at just $99.02 a share.
The ongoing pullback also reflects the waning enthusiasm of institutions for pharmaceutical stocks.
Rongtong healthcare fund manager Jiang Xiulei said to the Daily Economic News reporter on the phone, analyzing the past 10 years of institutional positions in the pharmaceutical sector, configuration willingness to a significant downturn of roughly four time periods: one is 2010Q3 to 2011Q1, the second is 2014Q1 to 2014Q4, the third is 2016Q3 to 2017Q3, the fourth is 2021Q2 to the current .
So, from the above time period, since the second quarter of 2021, the public fund of medicine configuration willingness downturn has been more than a year, and lasted longer than the previous three times.
Jiang Xiu Lei further analysis, summed up, the history of the first 3 times the reasons for under-allocation is not entirely consistent, but most of the time the policy plays a crucial role.
In the view of fund manager Jiang Xiulei, the first stage: 2010Q3-2011Q1, the fund configuration of low willingness is mainly because of the double envelope as a representative of the bidding price limit policy. Prior to this, the 2009 health insurance catalog expansion brought the overall acceleration of the performance of the pharmaceutical sector, accompanied by the whole base of the pharmaceutical position from less than 5% rapidly increased to nearly 15%. And 2010Q3 Anhui double envelope implementation, opened the institutionalized recruitment and procurement price reduction, triggering the market confidence in the pharmaceutical industry profitability setback.
The second stage is: 2014Q1-2014Q4, the main reason is the market style switch in the background of high position concentration. Pharmaceuticals since 2012 experienced a round of obvious configuration enhancement (mainly due to the bidding price limit policy correction and the Ministry of Health investment policy to promote the performance of the pharmaceutical sector since the bottom of 2012Q1 rapid rebound), the whole base of the pharmaceutical position level has reached about 17% of the history of the very high value, and at this time the stock market gradually entered the bull market environment, pharmaceuticals at that time still belongs to the defensive sector, the configuration of the preferences began to decline rapidly. In addition, the 2014 crackdown on commercial bribery in the pharmaceutical sector may also have some reason (triggered by GSK commercial bribery).
The third stage is: 2016Q3-2017Q3. this stage is a series of reform policies intensively introduced stage, and superimposed on the pharmaceutical sector after 2015 profit growth marginal downward. Policies during this period mainly include the two-invoice system, the abolition of drug markups, consistency evaluation, etc., which has a certain negative impact on the pharmaceutical industry, especially the distribution and pharmaceutical sectors. At the same time, this period is also a period of better performance of cyclical stocks, pharmaceutical allocation levels continue to decline.
The fourth stage is: May 2021 to the present. There are several main reasons: First, the entire pharmaceutical plate rose more in the early period, but also need to digest the valuation rose too fast; Second, the market in the past two years to focus more on the new energy track, the heat of the pharmaceutical industry has also cooled; Third, the emergence of the epidemic accelerated the market of medicine, investors have more knowledge of the phenomenon of the normalization of epidemics.
Bosch Fund equity three fund manager Zhang Hong believes that in 2016 and 2018, the pharmaceutical sector has experienced a market downturn. 2016 is mainly due to the short-term logic of the plate is not clear. After experiencing the Internet medical + precision medical market in 2015, medicine until 2017 to rediscover the new logic mdash;mdash; innovation and upgrading. And in 2018 it was due to the implementation of band purchasing by the Health Insurance Bureau, and the market disputed the long-term space of the pharmaceutical sector. But the market in 2019 immediately focused on the big logic of medical innovation + consumption, the plate back to the upward trend.
Still waiting for the east wind: policy catalyst
And much discussed by the market is that in addition to the institutional bottom, the pharmaceutical stocks are experiencing there is a valuation bottom.
Data statistics show that in the past 10 years, the Shenwan pharmaceutical overall sector valuation pivot is 37.62, the highest value of 74.37 on June 12, 2015, the lowest value of 22.66 on May 24, 2022.
Dongguan Securities Pharmaceuticals research team's statistics show that as of August 5, 2022, the overall PE of the SW Pharmaceuticals and Biologicals industry ( TTM, the overall method, excluding negative values) of about 24.6 times, lower than the industry since 2012 valuation pivot, located in 67% of the cent; relative to the CSI 300 overall PE premium rate of 115.2%, in the industry since 2012 relative to the CSI 300 premium rate pivot of 54% of the cent. The current valuation is in the industry nearly a decade in the relatively low region.
On the secondary market, the pharmaceutical industry experienced two years of bull market in 2019 and 2020, 2021 and 2022 January-July pharmaceutical index rose and fell in negative value, -23.1%. In terms of single-month performance, the Shenwan Pharmaceutical Index has also risen less and fallen more since 2022, with the Shenwan Pharmaceutical Index declining 7.5% in July after picking up in June.
A brokerage senior pharmaceutical analyst told reporters on WeChat, I think now medicine is really belong to a more underestimated time, may be missing a more obvious policy catalysts, but in terms of the absolute share price, from the valuation, from the proportion of institutional allocations, are relatively low.
Get on board where to drive?
Now the pharmaceutical stocks are superimposed on the triple bottom, does this mean we can prepare to get on the car? If we can get on board, where should the destination be?
Dong Wu Securities analyst Zhu Guoguang believes that the mainstream market strategy analysis is mostly optimistic about the pharmaceutical sector, the main reason is that the pharmaceutical sector and its valuation are at a low level in the last ten years, wide base, although there is an increase in allocation of the pharmaceutical sector, the proportion is still limited, the main reason is that the valuation of consumer health care, scientific research and service sector is more expensive. Three quarterly quotes and valuation switch is expected to usher in *** vibration.
Jiang Xiu Lei told reporters that if you compare with the history, from the dimension of the whole quarter, the pharmaceutical industry a *** is six times overweight. Six times overweight the main reason attributed to the industry as a whole boom upward, as well as their own just need attributes brought about by the bear market safe haven effect, such as the second quarter of 2008 and the second quarter of 2015; the third is the supply side of the boom brought about by the high degree of prosperity and the increase in the number of individual stocks. For example, the second quarter of 2012 and the two years of 2019 and 2020. These six overweights also brought about an overvaluation of the industry itself, but the pharmaceutical industry is different from the consumer goods industry in that there are policy influences that continue over the long term. Looking forward from now, policies such as band purchasing by the Health Insurance Bureau are becoming more and more normalized in their impact on the domestic pharmaceutical industry.
Looking at the pharmaceutical stock bull market in recent years, investors will find the main line of its investment logic, is to seize the main track of the head of the company, and since the second half of 2021, the cost-effective performance of individual stocks has become even more important. 2022 June began, the repair process of the pharmaceuticals seems to have been opened, but it is not optimistic.
Future pharmaceutical investment can consider four main lines, Jiang Xiu Lei is that the first is the policy, for example, traditional Chinese medicine, at present, a lot of state-owned enterprise reform of the subject is concentrated in the traditional Chinese medicine plate. In the past, the main logic of traditional Chinese medicine is to improve the valuation, the overall profitability of the Chinese medicine plate growth has not improved significantly. Now look, some of the Chinese medicine in the segmentation of the track appeared clear changes, such as Chinese medicine formula particles, star Chinese medicine single product, the future performance growth rate is expected to improve.
The second is science and technology, the current rebound is more small market value, large single product companies. Domestic A-share market, innovative drugs gradually from the previous too pessimistic expectations in the relief over, there has been an inflection point. In the medium and long term, we are more concerned about the platform type, the company that serves the innovative drugs, the company's product pipeline and the large single product can meet the future development direction of the company.
The third line is growth, but also the mainstay of the recent pharmaceutical rebound, including CXO, research track ophthalmology such as consumables, medical new infrastructure.
The fourth main line is recovery, such as flu vaccines, specialty medical services, specialty biologics. These varieties were previously valued relatively low, there is a need for valuation enhancement.
Zhang Hong, fund manager of the third department of equity investment of Bosera Fund, also told the reporter that at present, the old and new transformation of the big white horse has brought the vitality of the whole pharmaceutical industry, and at the same time fully reflects the vitality of China's economy.
Zhang Hong said that in the future, we believe that pharmaceutical investment in the following directions: First, medical consumption, in line with the historical development, including consumer Chinese medicine, personal care, etc., in line with the middle-income groups can generally afford to consume consumption. The rise of such consumption will likewise bring the opportunity of the entire pharmaceutical industry; secondly, we need to pay attention to the content of the real local scientific and technological innovation, or some domestic replacement of supporting industries, such as medium- and high-end manufacturing, precision manufacturing, etc.; thirdly, China's pharmaceutical manufacturing advantages, such as CDMO within the CXO, including some low-end manufacturing, like APIs and simple consumables, etc..
Zhang Hong predicted that in these three directions are likely to appear good companies, can find in line with investment expectations of the next five years of white horse stocks.
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