GF SEC: Penicillin cephalosporin upstream prices oscillate at high level, API stabilizing at bottom

GF SEC released a research report stating that by 2024, the destocking of downstream formulation customers has entered its final stage, with most customers resuming normal inventory levels and some gradually replenishing stock. In addition to the continued release of new raw materials drugs after the expiration of patents, the sector is in a bottoming-out and rebounding phase. Currently, there is a significant increase in prices of antibiotic products, with prices fluctuating at high levels; hormone products prices remain stable, with slight upstream price increases. However, it is important to note that the prices of various categories of raw materials drugs are still largely influenced by supply, and it is recommended to actively monitor changes in industry supply. GF SEC's main points are as follows: The prices of raw materials drugs are stabilizing at a bottom. According to data from the National Bureau of Statistics, in September 2024, the year-on-year PPI value of chemical drug raw materials manufacturing was 97.10, an increase of 2.0 from the previous month, and an increase of 1.63 from the 2024 H1 average of 95.47. Since the year-on-year PPI for raw materials manufacturing fell below 100 for the whole of 2023, the recent rise in PPI indicates that overall raw material drug prices are in a phase of minor bottoming out and recovery. Special raw material drug product prices are fluctuating at the bottom. According to data from HealthyNet, the price of hypertension products such as Valsartan in October 2024 was 710 yuan/kg, stabilizing in the range of 710-720 yuan/kg for over a year (from June 2023 to October 2024). The price of high blood lipid products like Atorvastatin calcium was 1300 yuan/kg in October 2024, and has remained stable at this price for over a year (from June 2023 to October 2024), indicating that the downward trend in prices of special raw material drugs is basically ending, and current prices are fluctuating at the bottom, expecting subsequent price flexibility. Antibiotic products have seen significant price increases in recent years, with prices fluctuating at high levels. According to data from HealthyNet, the price of upstream 6-APA in October 2024 was 350 yuan/kg, a slight increase from the average price of 320 yuan/kg in the second quarter of 2024. The price of 7-ACA, an upstream cephalosporin, in October 2024 was 480 yuan/kg, and has remained stable for nearly half a year (from April 2024 to October 2024). The prices of penicillin and cephalosporin upstream products are at high levels of fluctuation. The price of 4-AA in October 2024 was 700 yuan/kg, a 50% decrease from 1400 yuan/kg in January 2024, and the price of 4-AA has been at the low level of 700 yuan/kg for a quarter (from August 2024 to October 2024), basically stabilizing at the bottom. Prices of hormone products remain stable, with slight upward price adjustments in upstream prices. According to data from HealthyNet, prices of hormone products have seen slight increases in upstream prices, with the price of bicalutamide in October 2024 being 1.08 million yuan/ton, compared to 950,000 yuan/ton in the same period last year (October 2023), showing a slight upward trend in prices. Other hormone prices remain stable, with the price of progesterone in October 2024 being 19.5 million yuan/ton, stable for over a year (from August 2023 to October 2024); and the price of hydrocortisone in October 2024 was 56 million yuan/ton, also stable for over a year (from September 2023 to October 2024). The price of veterinary drug product fluorophenicaine is stabilizing at the bottom. In September 2024, the price of fluorophenicaine was 180 yuan/kg, and has been in the range of 180-210 yuan/kg for nearly a year (from November 2023 to September 2024) after a decline from high levels. Taking into account the production costs of products, some companies have entered a loss-making operating state, and it is expected that the industry will enter a stage of supply clearance. Investment advice It is recommended to focus on Zhejiang Xianju Pharmaceutical (002332.SZ), Apeloa Pharmaceutical (000739.SZ), Zhejiang Huahai Pharmaceutical (600521.SH), Zhejiang Tianyu Pharmaceutical (300702.SZ), Aurisco Pharmaceutical (605116.SH), and Zhejiang Ausun Pharmaceutical (603229.SH) among others. Risk warning: Market competition risk, environmental risk, industry policy risk.