China Post Securities: Pharmaceutical Sector Shows Volatile Uptrend with Room for Market Cap Growth

Stock News12-01

China Post Securities released a research report indicating that the pharmaceutical sector has experienced a volatile uptrend since early 2025, with valuations currently at the historical median level since 2010. Despite high premium rates, there remains room for further expansion in the sector's market capitalization share. The sector's performance is bottoming out, and with the clearance of negative factors such as centralized procurement and hospital anti-corruption campaigns, 2026 is expected to see strong performance. Key insights include:

**Innovative Drug Industry Chain**: Innovation remains the core driver, with opportunities in clinical data catalysts for high-quality domestic innovations and profit recovery in the industrial chain. Domestic assets are gaining global recognition, and multinational corporations (MNCs) face patent cliffs, driving demand for new product iterations. U.S. drug pricing policies favor domestic drug exports, while MNCs show increasing interest in China's innovative drug assets. Domestically, the synergy between medical insurance and commercial insurance is expected to enhance commercialization prospects for local innovations. Investment and financing activities remain robust, with strong enthusiasm for Hong Kong IPOs. Key areas include PD-(L)1/VEGF bispecific antibodies, ADC mechanisms, siRNA therapies, and autoimmune treatments. Beneficiaries: Innovent Biologics, Kangfang Biologics, Kelun-Botech, Mabwell Biopharma, Junshi Biosciences, etc.

**Non-Drug Sectors**: - **Medical Devices**: Some companies saw a turnaround in Q3 2025, with stable growth among emerging firms. Equipment procurement is recovering, and the impact of consumables centralized procurement is fading. Beneficiaries: Medprin Regenerative Medical Technologies, Intco Medical, Cofoe Medical, Yirui Technology, etc. - **Traditional Chinese Medicine (TCM)**: Adjustments to the essential drug list may create opportunities for TCM inclusion. Falling raw material prices could boost margins, with innovation-driven growth expected. Beneficiaries: Panlong Pharmaceutical, Fang Sheng Pharmaceutical, Zuli Pharmaceutical, Yiling Pharmaceutical, etc. - **Retail Pharmacies**: Industry consolidation is accelerating, with leading chains optimizing store structures and improving profitability through specialized services. Beneficiaries: Yifeng Pharmacy, Dashenlin.

**Risks**: Intensified competition, unexpected price cuts from centralized procurement, underperforming M&A activities, geopolitical risks, and tariff fluctuations.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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