The earnings season has concluded, and the anticipated broad-based recovery in the healthcare sector did not materialize. What truly transpired is a fundamental shift in the industry's valuation logic.
In recent years, capital markets were willing to pre-pay for narratives such as the "era of innovative drugs," "high growth in medical aesthetics," and "domestic substitution for medical devices." However, the current market no longer pays for "sector imagination" and has returned to basic business questions: Can revenue translate into profit, and is that profit supported by cash flow? Can growth break through the domestic ceiling? And what about the moat?
In other words, the era of across-the-board gains in healthcare is over. The future is more likely to see a "stratified era": a revaluation of high-quality companies, a continued shakeout of mediocre ones, a few leaders navigating cycles, and most players returning to reality.
Based on this shift, this article attempts to answer a core question: What are the main investment and development themes for the healthcare sector this year?
Breaking it down further reveals two more specific questions: (1) Which sub-sectors are still worth focusing on, and which have seen their old logic become obsolete? (2) Which companies are entering a revaluation phase, and which merely have temporarily good-looking financials with questionable sustainability?
**Three Key Signals from Financial Reports**
In the past "storytelling" era, the market believed that as long as revenue grew, profits would eventually follow, and scaling up would lead to stronger bargaining power and better operating leverage.
However, with the capital market now turning to "performance accounting," singular revenue growth has lost its persuasiveness. If profits and cash flow do not improve in tandem, such growth might stem from channel stuffing or heavy marketing spending, which is inherently unsustainable.
Kui Hua Pharmaceutical is a typical case. Its 2025 revenue fell 31% year-over-year, not due to a sudden disappearance of demand, but rather because of previous excessive channel stuffing and inventory buildup, forcing the company to now actively control shipment pace and reduce unreasonable inventory. This precisely illustrates that revenue growth without genuine end-demand support will eventually backfire.
Yifeng Pharmacy demonstrates another kind of pressure. In 2025, its revenue and net profit saw slight increases, but its net operating cash flow declined by 20%. Although the company attributed this to the Spring Festival stocking cycle, the three-year consecutive downward trend in operating cash flow indicates that store adjustments and changes in working capital efficiency during the industry downturn are the deeper pressures.
This means that the recovery in customer traffic and revenue does not equate to a healthy profit model and cash flow. (Data source: Company announcements)
Therefore, the first set of financial signals to watch is: **performance realization capability**, i.e., whether revenue, profit, and cash flow have formed a closed loop again.
This can be broken down into several questions: (1) Has net profit improved in sync with revenue recovery? (2) Has operating cash flow recovered in sync with profit improvement? (3) Have gross margin, sales expense ratio, and administrative expense ratio deteriorated? (4) Are there any abnormal changes in accounts such as receivables and inventory?
Simultaneously, be wary of "false recovery." For example, year-over-year improvement due to a low base does not mean the industry has returned to high prosperity; profit growth driven by one-time gains does not signify a mature business model; revenue recovery from channel restocking does not mean genuine end-demand has returned.
Taiji Group is a classic example. Although its 2025 net profit attributable to shareholders surged 352%, this was mainly due to non-recurring gains and losses such as disposal of idle assets, subsidiary bankruptcy liquidation, and government subsidies, not operational improvement. Its revenue actually fell by 15%, with both revenue and profit declining in Q1 2026. This shows that a good-looking income statement does not equate to genuine improvement in operational quality.
Beyond performance realization, the second, more important set of financial signals is whether **globalization capability** has truly begun to materialize.
Overseas business is becoming a crucial way to break through the domestic ceilings of centralized procurement and medical insurance cost controls. Furthermore, the capital market already assigns significantly different valuation systems to companies with FDA approvals, successful out-licensing deals, or sustained overseas revenue, compared to those still primarily competing within the domestic medical insurance payment system.
The valuation contrast between BeiGene and Hengrui Medicine is typical. BeiGene, with the successful independent global expansion of drugs like zanubrutinib and tislelizumab, derives 68.5% of its revenue from overseas and achieved its first annual profit in 2025. In this context, despite its modest profit scale, the market is willing to pay a high premium for its defined global market potential, resulting in a valuation (TTM P/E) significantly higher than its peers.
In contrast, Hengrui, while a domestic innovative drug giant, lacks products for independent global expansion, with overseas revenue accounting for less than 5%. Its growth remains heavily reliant on the domestic market. Consequently, even with its large profit scale, its valuation is constrained by the domestic payment ceiling. This is likely a key reason why its 43x trailing P/E on the A-share market, though far lower than BeiGene's 123x, still faces questions about being relatively high.
Thus, the capital market is voting with real money, indicating that "globalization realization capability" has replaced "number of domestic approvals" as a more important valuation anchor in innovative drugs and even high-end manufacturing.
The third set of signals is that **competitive rules are changing**. If the surface-level change from financial reports is the market shifting from "watching growth rates" to "watching realization, watching global expansion," then the deeper change is that the competitive rules within various healthcare sub-sectors are being rewritten.
Innovative drugs are the most typical: the past was about pipeline size and R&D stories; now it's about commercialization capability and global realization. For CXOs, the past was about capacity expansion speed and industry红利; now it's about order quality, client structure, and global delivery capability. For pharmacies, the past was about store count and医保流量; now it's more about single-store efficiency, prescription承接, and profit models. Medical aesthetics and vaccines have shifted from "competing on景气" to "competing on genuine demand, product differentiation, and payment capability," and so on.
2025 financial reports have validated the above judgments. Several innovative drug companies delivered impressive results: Hengrui Medicine's innovative drug sales contribution has risen to over 58%, becoming the main performance driver. Meanwhile, BeiGene and Innovent Biologics achieved their first annual profits, with many other companies reducing losses.
In the CXO industry, leading companies like WuXi AppTec and Pharmaron saw their performance improve first, while companies like Medicilon remain in a loss-making state.
The case of medical aesthetics leader IMEIK, with its 2025 revenue down 18.9% but sales expenses surging 39.7%, leading to a deterioration in both profit and cash flow, is a typical example. Only the launch of blockbuster products with differentiated value, like "Haiti," might salvage such performance declines.
Therefore, what is truly being revalued in this round is not just company performance, but also a company's position within the competitive landscape. Future opportunities in healthcare will no longer come from "sector-wide uplift," but from a value re-ranking based on the new criteria of "realization capability - globalization capability - competitive moat."
**Who is Being Revalued, Who is Recovering, and Who is Still Being Shaken Out?**
Based on the above signals, healthcare companies can be clearly categorized into three camps:
**(1) Revaluation Direction: Qualitative Change in Logic, Commanding Valuation Premiums.** The core lies in having a validated business model and growth potential that breaks through the domestic ceiling. Innovative drug leaders and high-end medical devices are typical representatives. Their commonality is that realization capability is strengthening or they possess global expansion potential. These directions may not offer the highest short-term volatility, but they better align with the new valuation logic.
Looking at innovative drugs first. The industry has entered a dual-assessment period of "commercialization realization + globalization validation." Therefore, what truly deserves revaluation is not the entire innovative drug sector, but those companies that have proven their盈利拐点, core product ramp-up, and overseas breakthrough capabilities.
Leading companies like BeiGene (benchmark for independent global expansion + profit realization), Hengrui Medicine (BD-driven global expansion + innovative drug revenue), and Innovent Biologics (which entered a BD合作 with Takeda in 2025 potentially worth up to $11.4 billion + innovative drug revenue) are representatives meeting both conditions and are the most值得重点跟踪 directions under the new valuation logic.
Key跟踪指标 include: ① Realization capability: Core product ramp-up,盈利拐点 (turning profitable), cash flow turning positive, etc., proving self-sufficiency and operational周转, and a viable business model. ② Globalization capability: Overseas revenue proportion, progress in BD deals, progress in independent global expansion, etc., proving growth potential has broken through the domestic medical insurance payment ceiling.
Next, the logic for the high-end medical device赛道 is also undergoing qualitative change. The past market focus was on domestic substitution; now it values whether companies can升级 domestic substitution into global competitiveness. Therefore, companies that have made breakthroughs in overseas certifications, installations, channels, and high-end product portfolios are more likely to率先完成 value重构.
Some companies, like United Imaging Healthcare, MicroPort® MedBot, Jingfeng Medical, and Tinavi Medical, are already redefining standards in certain products and technologies and beginning to develop overseas commercialization capabilities. Their valuation support is shifting from policy红利 to the realization of global competitiveness, warranting close attention.
This is also the core支撑 for the value重构 and strong stock performance this year of companies like Tinavi Medical, Jingfeng Medical, and MicroPort® MedBot. (United Imaging Healthcare's relative weakness in the capital market is mainly due to concerns that its profitability might be affected by domestic centralized procurement and intense competition in some products.) (Image source: Choice data)
Key跟踪指标 for this category of companies include: overseas revenue proportion, progress in international certifications, and overseas channel development.
**(2) Marginal Recovery Direction: Limited Upside and Valuation Premiums.** CXOs, branded traditional Chinese medicine (TCM), and blood products are closer to this category, though the three are not entirely identical.
Looking at CXOs first, the industry has moved from a past period of普遍 order红利 to a new phase of订单向头部集中 and corporate differentiation. Its core矛盾 is no longer "having orders or not," but the disconnect between order quality and profit. During the industry downturn, price competition by some companies to secure orders resulted in大量低价合同 that延续至今. In this situation, even with orders, profits may not improve同步.
Therefore, the industry as a whole should be defined as undergoing **marginal recovery**, not a return to high景气. The industry as a whole will find it difficult to return to the past era of普遍 high growth and high valuations.
Those likely to achieve确定性修复 are primarily leading companies with优质订单结构, stable global client bases, and efficient delivery capabilities.
This may be an important reason why the strong performance of leading company WuXi AppTec did not lead to股价走强 for all CXO companies. Choice data shows that year-to-date, WuXi AppTec's H-share and A-share prices have累计涨幅 of 39% and 21% respectively, far exceeding the 13% gain of the申万医疗研发外包指数.
Key跟踪指标 for such companies include: newly signed orders and order backlog, overseas client structure, capacity utilization rate, and利润率修复情况. (Chart source: Choice data)
Secondly, branded TCM companies rely on brand,渠道, and cash flow to maintain steady growth, with limited upside, resembling defensive consumer goods assets. Therefore, the recovery for these companies manifests more as valuation stability rather than valuation expansion. Key metrics to watch include: OTC channel sales, price increases, operating cash flow, and changes in expense ratios.
As for blood products, they are better placed in an observation zone of "short-term pressure, long-term壁垒仍在." They face short-term pressure from supply-demand mismatch, expansion of centralized procurement, and tax system adjustments, but their resource壁垒 has not disappeared. Key metrics include plasma collection volume, product mix, the impact of centralized procurement, and the transmission of tax burden changes to profits.
Note: ① Market层面: Industry plasma collection volume grew较快 in 2023-2024, while post-pandemic end-demand saw some回落, leading to阶段性供过于求 in 2025. ② Policy层面: Starting 2023, regions like Anhui, Tianjin, Beijing, and Hebei相继开展 blood product centralized procurement. Also, from January 1, 2026, the VAT rate for biological products changed from a simplified 3% levy to the standard 13% rate. As the blood products industry finds it difficult to obtain input VAT credits for costs like upstream plasma procurement,实际税负增加明显, creating significant profit pressure. (Chart source: Choice data)
**(3) Old Logic Shakeout Direction: Period of Performance Pain.** Sectors like pharmacies, medical aesthetics, and vaccines are seeing their original growth models challenged and are in a phase of adjustment and shakeout.
For the pharmacy板块, store expansion is no longer a key focus metric; instead, profit realization is. Key跟踪指标 include: same-store growth, gross margin and expense ratios, operating cash flow, and统筹处方承接 efficiency.
The old logic for medical aesthetics, which relied on channel expansion and marketing-driven growth, is being shaken out. In the short term, greater caution is warranted regarding利润 and现金流承压. Key跟踪指标 include: core single-product ramp-up, sales expense ratio, stability of终端价格体系, and the differentiated value of new products.
Some品种 in the vaccine赛道 are caught in supply-demand mismatch and price wars. For example, HPV vaccines have gone from "hard to get" to "hard to sell"; influenza vaccine tender prices continue to decline, even reaching极端低价 like "the price of a cup of milk tea," yet domestic influenza vaccination rates have not seen significant improvement. Key跟踪指标 include批签发 data, tender prices, and inventory destocking.
**In Conclusion**
To summarize, the healthcare sector in 2026 has bid farewell to the整体 cycle of普涨普跌 and entered a structured era of重新排位 according to the new valuation logic. In the future, the market is unlikely to普遍 pay for "storytelling" and will instead start "calculating three accounts": (1) Can you realize performance? (Is revenue, profit, and cash flow a closed loop?) (2) Do you have globalization potential? (Have you broken through the domestic ceiling?) (3) Do you possess barriers that are difficult for others to replicate? (What is your position in the competitive landscape?)
These "three accounts" determine whether a company moves towards revaluation, remains in marginal recovery, or continues to struggle in the old logic shakeout.
Analysis suggests that innovative drug leaders and high-end medical device companies have begun their value revaluation and deserve close attention. CXOs and branded TCM have recovery potential, but with limited业绩弹性 and valuation premiums. Companies in sectors like pharmacies, medical aesthetics, and vaccines are undergoing a shakeout of their old logic,处于业绩阵痛期, requiring caution for short-term investment.
Therefore, the most significant meaning of this earnings season is not confirming whether healthcare has recovered, but rather providing signals for the next phase of the industry's胜负手: Those who can turn growth into profit, domestic capability into global potential, and barriers into sustainable cash flow will be the ones qualified for revaluation.
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