Guojin Securities: Terminal demand is gradually recovering, and the prosperity of the pharmaceutical and health industry is expected to rise

According to the Zhitong Finance APP, Guojin Securities released a research report stating that in the first half of 2025, some left-side sectors such as ophthalmology, dentistry, and pharmacies are expected to see improvements in prosperity. Meanwhile, the performance base for 2024 is high in the first half and low in the second half, with base pressure decreasing quarter by quarter. The inventory of traditional Chinese medicine companies outside hospitals continues to be digested, and the execution time for centralized procurement of Chinese patent medicines has been announced in multiple locations, with selected products expected to gradually enter a volume growth phase within hospitals, leading to an overall positive performance outlook. The report is optimistic about the performance improvement trend in the second half of 2025 for the aforementioned left-side sectors, with prosperity expected to rise. Key targets include Aier (300015.SZ), Shanghai Pharma (601607.SH, 02607), CR Sanjiu (000999.SZ), and DEEJ (000423.SZ).

Guojin Securities' main viewpoints are as follows:

Traditional Chinese Medicine: The overall performance in the first half of 2025 is under pressure in terms of revenue and net profit attributable to the parent company after deducting non-recurring gains and losses. The incidence of influenza in the first half of the year is lower year-on-year, and some companies related to antiviral, respiratory, and digestive traditional Chinese medicines are significantly affected by inventory destocking or base digestion in their short-term performance. The retail environment for pharmaceuticals is relatively weak, and the pharmacy industry is entering a consolidation phase, with fluctuations in the sales of OTC products outside hospitals. The actual execution progress of the national centralized procurement of traditional Chinese medicines and the results of the first batch of expanded selections is relatively slow, with limited volume growth for selected products within hospitals. Looking ahead to the second half of the year, the inventory outside hospitals continues to be digested, with relatively small base pressure. The execution time for centralized procurement of traditional Chinese medicines has been announced in multiple locations, and selected products are expected to gradually enter a volume growth phase within hospitals, leading to an overall improvement in performance on a quarter-on-quarter basis.

Pharmacies: The overall performance in the first half of 2025 shows a slight pressure on revenue year-on-year, while profits have rebounded year-on-year. Revenue is under pressure partly due to weak same-store growth and limited endogenous contributions; on the other hand, the pace of expansion has slowed, and many stores have been closed since the second half of 2024. Profit performance is better than revenue, mainly due to the gradual realization of cost reduction and efficiency improvement results. Some companies have optimized the proportion of employee compensation and rent expenses to revenue through measures such as rent reduction and improving labor efficiency. In terms of category structure, both traditional Chinese and Western medicines still exhibit essential demand characteristics, with overall fluctuations being minor. Non-pharmaceutical sales have declined, but policies are expected to gradually relax restrictions on non-pharmaceutical sales, and some companies have actively attempted to expand into non-pharmaceutical categories, showing potential for future sales improvement. On the policy front, there is active promotion of drug traceability codes, and the granting of medical insurance qualifications is becoming stricter, leading the industry towards more compliant development. Non-compliant stores are expected to be eliminated, and the industry is in a clearing phase, with leading companies' market share expected to further increase.

Pharmaceutical Distribution: Performance is under pressure, with overall revenue performance being stable and profits slightly declining. The accounts receivable collection cycle has increased, but with the continuous advancement of policies, the collection situation is expected to improve in the future, and there are expectations for performance and collection improvements.

Medical Services and Consumer Healthcare: In the first half of 2025, the medical services sector gradually emerged from a slump under the dual drive of recovering consumer demand and successful technological upgrades, with profit growth exceeding revenue growth. However, performance in segmented areas shows a differentiated trend. From a semi-annual perspective, segments with strong consumer attributes, such as ophthalmology and dentistry, have shown signs of recovery. The recovery in ophthalmology is particularly evident, manifested by the launch of new refractive surgical techniques stabilizing and slightly increasing the industry’s refractive ASP, while the resilience of demand in optometry provides strong support for overall performance. In the dental field, orthodontic business has also achieved rapid growth under the strategy of "exchanging price for volume" at the terminal level On the other hand, the serious medical field is still facing certain pressures due to the impact of DRG payment reform and medical insurance cost control policies. Companies are generally reducing leverage, enhancing the stability of their balance sheets, and responding to market uncertainties through cost reduction and efficiency improvement. At the same time, the application of AI technology has further improved operational efficiency and accelerated business turnover. Looking ahead to the whole year, it is recommended to pay attention to the empowering opportunities that innovative medical technologies such as AI and brain-computer interfaces bring to traditional medical services.

Key Targets: Aier, Shanghai Pharma, CR Sanjiu, DEEJ, Yifeng Pharmacy, Tongce Medical, Lingrui Pharmaceutical, Taiji Group, Gushengtang, Meinian Health, Angelalign, Kunming Pharmaceutical Group, Dacanglin, etc.

Risk Warning: Risks such as the progress of centralized procurement not meeting expectations, outpatient recovery not meeting expectations, R&D progress not meeting expectations, domestic and foreign policy risks, and risks related to mergers and acquisitions not meeting expectations