瑞士银行--中国中药行业研究报告2008年6月

4894

收藏 2008-06-25

Summary and investment case TCM and western medicine both have their strong points. In China it is generally believed that TCM has the advantage in the treatment of chronic and intractable diseases, such cardio-cerebral vascular diseases, strengthening the immune system and in relieving symptoms for people who feel unwell but have no identifiable disease. Western medicine is considered to be better for the treatment of medical emergencies and severe illnesses. China has historically used policy guidance to support the TCM industry. The new round of reforms to the medical system the government is currently pursuing is likely to have a direct impact on the overall pharmaceutical industry, in our view. We believe the expansion of the scope of medical insurance should increase the affordability of drugs, and the reform of medical service institutions should stimulate spending on health care services by citizens, gradually improving the environment for drug industry development. We expect TCM to play an increasingly important role in community health service centres and rural medical institutions given its perceived advantages in preventive care and health maintenance. The government is enthusiastically promoting TCM in community health service centres and rural medical institutions. However, it is important to remember that at present, most TCM products are sold in pharmacies; that is, through OTC channels. The question is whether TCM companies can take advantage of these favourable government policies. The ability of firms to develop these new markets—community health service centres and rural medical institutions—will be tested. Rising raw material prices have put margin pressure on the TCM industry, and whether or not firms have the ability to pass on increases will be key. We believe there are two main directions of development for TCM companies: (1) to leverage their brands and use pharmacy chains as their major sales channels to gradually expand into the consumer goods market and obtain greater pricing power; and (2) to rely on technological and technical advantages, using hospitals as their main sales channels and modern TCM products as the direction of development, to maintain high profit margins by continuously launching new products and new formats. In the long term we see two major investment themes for the TCM industry: (1) against a background of rising ingredient prices, companies that have the ability to raise prices; and (2) against a background of medical reform, companies that stand to benefit from that reform. We believe that among TCM companies holding traditional brands, Shandong Dong-e E-jiao (DEEJ) and Yunnan Baiyao (YB) have relatively strong pricesetting ability, which is based on good marketing ability and brand management. Guangzhou Pharmaceutical’s (GZP) herbal tea operations also have relatively strong price-setting capacity, in our view.Among modern TCM firms, Tianjin Tasly Pharmaceutical (Tasly), which uses hospitals as one of its main sales channels, is currently focusing on developing in the community health service centre and rural medical institution markets. This kind of firm is more likely to be able to profit from the trend for increased drug usage at basic medical service institutions brought about by medical reform. However, since we anticipate a lag before TCM companies benefit from medical reform, we believe it will be important to follow developments in this area.Contents page Summary and investment case 3 Industry analysis 8 Industry risks 22 Valuation and comparables 24 Company pages 33 — Shandong Dong-E E-Jiao.....................................................................................34 — Investment case .............................................................................................35 — Company risks ...............................................................................................42 — Financials .......................................................................................................43 — Price target derivation ....................................................................................47 — Company background ....................................................................................48 — Guangzhou Pharmaceutical .................................................................................51 — Investment case .............................................................................................52 — Company risks ...............................................................................................59 — Financials .......................................................................................................60 — Price target derivation ....................................................................................65 — Company background ....................................................................................66 — Guangzhou Pharmaceutical - A ...........................................................................69 — Investment case .............................................................................................70 — Company risks ...............................................................................................77 — Financials .......................................................................................................78 — Price target derivation ....................................................................................83 — Company background ....................................................................................84 — Tianjin Tasly Pharmaceuticals (G) .......................................................................87 — Beijing Tongrentang (G) .......................................................................................94 — Tong Ren Tang Technologies ............................................................................100 — Yunnan Baiyao Group (G) ..................................................................................106