HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

China Resources Sanjiu Medical & Pharma / Equity Bottom-Up

<ul>
<li>For a considerable period of time, the industry has been speculating about when the large-scale VBP of TCM formula granules will officially begin. Now, here it comes. </li>
<li>Primary market and other financing except IPO in European and US biopharma industry shows a significant signal of recovery. However, IPOs remain stagnant. </li>
<li>We analyzed key points about China Resources Sanjiu. Sanjiu is expected to have better performance in 2023 than 2022, but we advise investors to allow a sufficient margin of safety.</li>
</ul>


For a considerable period of time, the industry has been speculating about when the large-scale VBP of TCM formula granules will officially begin. Now, here it comes. 
Primary market and other financing except IPO in European and US biopharma industry shows a significant signal of recovery. However, IPOs remain stagnant. 
We analyzed key points about China Resources Sanjiu. Sanjiu is expected to have better performance in 2023 than 2022, but we advise investors to allow a sufficient margin of safety.


China Healthcare Weekly (Aug.18) - TCM Formula Granules VBP, Global Financing Rebound, CR Sanjiu

China Traditional Chinese Medicine / Equity Bottom-Up

<ul>
<li>The rebound of China TCM’s performance in 23H1 could be mainly driven by its core concentrated TCM granules business as well as the recovery of other businesses after China reopens. </li>
<li>We analyzed the potential performance changes that may occur in 23H2. The full year performance of 2023 will be worth looking forward to. We expect the share price to rebound.</li>
<li>TCM VBP is always an issue. Due to the high base in 2023, the YoY performance growth in 2024 could decline, which may put pressure on valuation at that time. </li>
</ul>


The rebound of China TCM’s performance in 23H1 could be mainly driven by its core concentrated TCM granules business as well as the recovery of other businesses after China reopens. 
We analyzed the potential performance changes that may occur in 23H2. The full year performance of 2023 will be worth looking forward to. We expect the share price to rebound.
TCM VBP is always an issue. Due to the high base in 2023, the YoY performance growth in 2024 could decline, which may put pressure on valuation at that time. 


China Traditional Chinese Medicine (570.HK) 23H1-Positive Profit Alert Reinforce Optimism About 2023

Thematic (Sector/Industry)

<ul>
<li>Policies will determine the development direction of the industry, which would then determine the profit model of companies. Companies that align with policy direction would outperform in the coming cycle.</li>
<li>The prosperity of the industry would determine the development trend of companies. For China healthcare, without a significant policy shift, it would be difficult for industry beta to emerge.</li>
<li>Domestic companies cannot achieve successful commercialization/internationalization mainly because they don’t have excellent enough products. It must be innovation that keeps companies alive and then thrive, rather than relying on policy changes.</li>
</ul>


Policies will determine the development direction of the industry, which would then determine the profit model of companies. Companies that align with policy direction would outperform in the coming cycle.
The prosperity of the industry would determine the development trend of companies. For China healthcare, without a significant policy shift, it would be difficult for industry beta to emerge.
Domestic companies cannot achieve successful commercialization/internationalization mainly because they don’t have excellent enough products. It must be innovation that keeps companies alive and then thrive, rather than relying on policy changes.


The Cyclicality of China Healthcare - Policy Environment, the Industry, and Investment Opportunities

<ul>
<li>China TCM’s concentrated TCM granules business improved significantly in 22H2, and the total revenue in 22H2 also increased by 42% YoY, indicating that the decline trend has been significantly curbed.</li>
<li>Due to its SOE background+ national standard setters with the largest number of national standards filed, China TCM would be the beneficiary of the industry's transformation during this dividend period.</li>
<li>Due to low base last year, China TCM’s performance would rebound this year. Considering favorable policies and large growth potential in TCM granules, we’re optimistic about its share price performance.</li>
</ul>


China TCM’s concentrated TCM granules business improved significantly in 22H2, and the total revenue in 22H2 also increased by 42% YoY, indicating that the decline trend has been significantly curbed.
Due to its SOE background+ national standard setters with the largest number of national standards filed, China TCM would be the beneficiary of the industry's transformation during this dividend period.
Due to low base last year, China TCM’s performance would rebound this year. Considering favorable policies and large growth potential in TCM granules, we’re optimistic about its share price performance.


China Traditional Chinese Medicine (570.HK) - Looking Forward to a Performance Turnaround in 2023

<ul>
<li>The current policy environment determines that TCM is the core asset of pharmaceuticals, not innovative drugs. We think it is necessary to take a fresh look at TCM industry.</li>
<li>TCM formula granules have more opportunities. Exclusive variety of branded OTC TCM has better outlook. TCM medical services also deserve investors’ attention, because hospitals are the main channels for TCM. </li>
<li>China's pharmaceutical industry has its unique features. We recommend investors to leave a place in the portfolio to invest in TCM companies, which could outperform in the current pharmaceutical environment.</li>
</ul>


The current policy environment determines that TCM is the core asset of pharmaceuticals, not innovative drugs. We think it is necessary to take a fresh look at TCM industry.
TCM formula granules have more opportunities. Exclusive variety of branded OTC TCM has better outlook. TCM medical services also deserve investors’ attention, because hospitals are the main channels for TCM. 
China's pharmaceutical industry has its unique features. We recommend investors to leave a place in the portfolio to invest in TCM companies, which could outperform in the current pharmaceutical environment.


China Traditional Chinese Medicine (TCM) Industry - TCM Is Becoming Indispensable in the Portfolio

Hong Kong

China Traditional Chinese Medicine Co. Limited, through its subsidiaries, manufactures and sells medicine and pharmaceutical products in China.

China Traditional Chinese Medicine (570 HK)

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

China Traditional Chinese Medicine (570 HK)

China Healthcare Weekly (Aug.18) - TCM Formula Granules VBP, Global Financing Rebound, CR Sanjiu

China's first TCM formula granules VBP begins.Primary market financing in global biopharma industry rebound, but IPO remains weak.China Resources...

Xinyao (Criss) Wang