Donghai Securities: Influenced by multiple factors, the pharmaceutical and biological sector has been under pressure in the first half of the year. The performance in the second half of the year is expected to stabilize and improve.

Donghai Securities released a research report stating that in the first half of the year, the pharmaceutical and biotech sector was affected by various factors such as macro environment, industry policies, and the high base of the epidemic, leading to overall performance pressure and poor market performance. In the second half of the year, as the negative factors from the previous period continue to weaken, the sector as a whole is expected to stabilize and improve. Currently, the pharmaceutical and biotech sector is in a multiple bottom range, showing significant investment value, and it is recommended to focus on sub-sectors and individual stocks with good development momentum, unexpected performance, and potential for performance reversal. Focus areas include the innovation drug chain, equipment consumables, medical services, second class vaccines, blood products, chain pharmacies, and raw materials sectors and stocks. Performance was under pressure in the first half of the year due to various disturbances, but performance is expected to stabilize and improve in the second half of the year. Of the 432 listed companies in the pharmaceutical and biotech sector, 2024H1 achieved a total operating revenue of 1.2287 trillion RMB, a year-on-year decrease of 0.98%; and a net profit attributable to the parent company of 102.487 billion RMB, a year-on-year decrease of 8.97%. From 2023Q1 to 2024Q2, the year-on-year revenue growth rates of listed companies in the pharmaceutical and biotech industry were 2.10%, 5.33%, -3.32%, -1.87%, -0.40%, -1.58% respectively; and the year-on-year net profit growth rates were 0.16%, -1.25%, -4.61%, 4.02%, 1.66%, -2.42%. Influenced by factors such as the epidemic base, drug price reductions, and anti-corruption in healthcare, the overall performance of listed companies in the pharmaceutical and biotech sector was under pressure in the first half of the year. In the second half of the year, with the gradual weakening of the negative factors from the previous period, the industry's normal operating conditions continued to improve, and full-year performance is expected to show a trend of starting low and ending high. Sub-sector performances diversified, with a focus on innovative drugs and other sub-sectors. The top 5 sub-sectors with year-on-year revenue growth rates in 2024H1 were innovative drugs (+59.55%), medical consumables (+8.37%), chain pharmacies (+7.48%), raw materials (+5.32%), and blood products (+3.76%); and the top 5 sub-sectors with year-on-year net profit growth rates were chemical preparations (+15.08%), blood products (+14.47%), medical consumables (+11.72%), raw materials (+8.23%), and hospitals (-7.14%). Among them, sub-sectors such as innovative drugs and in-house preparations benefited from the rapid release of new varieties and the recovery of routine medical services, showing good overall performance and worth paying attention to. Investment recommendations: Stock combinations include Betta Pharmaceuticals (300558.SZ), Xiamen Amoytop Biotech (688278.SH), Jiangsu Sinopep-Allsino Biopharmaceutical (688076.SH), Sonoscape Medical Corp. (300633.SZ), Xi'An International Medical Investment (000516.SZ), Shenzhen Kangtai Biological Products (300601.SZ), China Resources Boya Bio-pharmaceutical Group (300294.SZ), Yifeng Pharmacy Chain (603939.SH), Changzhou Qianhong Biopharma (002550.SZ), etc. Risks: Risks include industry policy, underperformance of company results, and unexpected events.