Pharmaceutical industry: The performance of the Chinese medicine sector is expected to grow steadily

Flushing data shows that as of February 22, 28 of the 55 SWM listed companies in the SW Industry Group posted performance forecasts or express reports, of which 21 companies had performance changes between 20% and 60%, accounting for 75% of the total. The performance of the two companies declined year-on-year. According to industry insiders, under the background that the price of Chinese herbal medicines is still at a high level, the performance of the Chinese medicine sector is still expected to achieve steady growth, while the high-end brand drug companies have made the market more hopeful.

Medicinal materials skyrocketing "torture" performance

The cost pressure caused by soaring prices of Chinese herbal medicines throughout the year. The Ministry of Commerce announced on February 21 that the price index for the Chinese herbal medicines in Chengdu was 110.66, which was approximately 15.38% lower than the 130.77 point at the highest level in May 2011, but it was still at a historical high compared with the same period in 2010, among which the plant stems last week Herbs rose by 7.1% compared with the previous month. According to data from the China Herbal Medicine Association's Traditional Chinese Medicine World Wide Web, prices of Chinese herbal medicines showed highs, lows, and lows in 2011, but the current TCM Comprehensive 200 index was more than 1.2 times higher than at the beginning of 2009. The three-year increase in costs has greatly impacted the profitability of the Chinese medicine industry.

With the ups and downs of the prices of Chinese herbal medicines involved, the Chinese medicine industry presented a situation of “upstream and downstream calls, middlemen laugh” in 2011. The production and labor costs of the cultivation of Chinese herbal medicines in the upper reaches continue to increase, and the pressure on the cost of raw materials for downstream pharmaceutical companies continues to increase, while the intermediary traders take advantage of the “bull market” of medicinal herbs to make substantial gains. In July 2011, the National Development and Reform Commission began to standardize the circulation of Chinese herbal medicines and crack down on the hoarding of medicinal herbs. In addition, new herbal medicines went on the market, and the overall price of Chinese herbal medicines began to fall rapidly.

In the process of soaring prices of Chinese herbal medicines, traditional Chinese medicine companies have suffered. In the first half of 2011, the price of Taizi ginseng reached a historical high of 380 yuan/kg. The gross gross margin of Jiang Medicine (600750) fell by 18.77%, and it began to reduce production. At present, the price of Taizhou ginseng has fallen back to about 250 yuan/kg, but Jiang's Chinese medicine industry expects its annual business performance to decline by 15% year-on-year. In addition, Jiaying Pharmaceutical (002198) was among the top losers with a 30% decline in performance. The company said that the increase in costs such as raw materials and labor caused an increase in operating costs of 31.8%.

According to industry sources, the coverage of domestic medical insurance reached 95% for the first time in 2011. The substantial expansion of the pharmaceutical market has increased the demand for traditional Chinese medicines and led to a steady growth in the overall performance of the Chinese medicine sector. However, from the perspective of changes in the gross margin of the Chinese medicine industry, The soaring price of medicinal herbs in recent years has weakened the profitability of the sector.

High-end Chinese medicine brands look forward to

The performance of high-end Chinese medicine brand companies made the market quite expectable. For the whole year of 2011, the net profit of Pien Tze Huang is estimated to reach 254 million yuan, an increase of 30.86% over the same period of last year. However, the performance of representative companies such as Tong Ren Tang, Tasly, Ma Yinglong, Dong'e Ejiao, Yunnan Baiyao, and Jiuzhitang remains mysterious.

Huang Qiujun, a research fellow at Guohai Securities Pharmaceutical Industry, said that high-end brand pharmaceutical companies have their own pricing power and high gross profit margins, and their strong profitability enables them to attract more funds to invest in Chinese herbal medicine planting bases and also help enterprises to follow high-standard production models. Produce high-quality Chinese medicine products, and have more funds to invest in R&D and marketing, thereby strengthening brand status and profitability.

At present, Pien Tze Huang and Dong E Ejiao have invested heavily in artificial breeding and raising donkeys. The brand advantage not only ensures high gross profit margins for the products, but also controls the resources of the major Chinese animal medicines. Yunnan Baiyao and Tong Ren Tang have established a large-scale GAP planting base for Chinese herbal medicines, stabilizing their costs.

In 2011, Pien Tze Huang has twice increased its flagship product price. Domestic prices of Pien Tze Huang increased by 60 yuan per grain, and export prices increased by 9.5 US dollars per grain. Company officials expressed no concern about sales decline. Dong'e Ejiao raised its products three times in 2010. Based on the price, in early 2011 it was announced that the price increase would not exceed 60%. After entering 2012, prices would be raised twice in succession, and the price increase would reach 20%, causing market concern.

Dongxing Securities Research stated that, unlike the general decline in the profitability of the Chinese medicine industry, raw material self-sufficiency has basically realized the integration of industrial chain companies and companies that are capable of transforming cost pressures through price increases. Gross profit margins have risen in the past two years. Shows a competitive advantage.