China Post Securities: The high prosperity of "AI + Medical" is expected to continue, and favorable policies for innovative drugs will continue to be augmented.

China Post Securities released a research report stating that by analyzing the bottom performance of 24-year performance forecasts, it has identified significant performance improvement and growth potential in specific sectors and individual stocks, as well as combining the market hotspot of AI. The current outlook for the three major sectors of innovative drugs, low-value consumables, and AI+ pharmaceuticals is positive. Specifically, in the innovative drug sector, the performance forecast for 24 years shows significant differentiation, with leading companies achieving significant revenue and profit growth due to the rapid volume increase of innovative drugs already on the market and internationalization progress. In terms of low-value consumables, leading companies are expected to gradually transition from product validation to order realization stage, with the leading glove company maintaining full production status, optimizing order structure, effectively eliminating high-cost and outdated industry capacity, significantly increasing concentration, and possessing obvious bottom investment value. Next is AI+ pharmaceutical, which is expected to become one of the main investment themes in the pharmaceutical sector by 2025. The application of AI is wide-ranging, and technological breakthroughs and commercialization will bring huge investment opportunities. China Post Securities' main points are as follows: "AI+medical" continues to be strong, with high prosperity expected to continue. Recently, individual "AI+medical" stocks have performed well, particularly in the fields of AI+assisted diagnosis and AI+data services. Several listed companies have announced new AI application scenarios in their business. The industry has explosive growth opportunities, and the application of "AI+medical" in drug development, cancer diagnosis, medical imaging, surgical automation, and other areas is expected to bring about significant changes. The high prosperity trend of "AI+medical" is expected to continue. The continuous improvement of policies favorable to innovative drugs in the pharmaceutical sector is expected to attract significant positive developments in the payment sector. Recently, the policy document "Several Measures on Supporting the High-Quality Development of Innovative Drugs by Medical Insurance (Second Round of Solicitation for Opinions)" was leaked in the industry, following the approval of the "Comprehensive Support for the Development of Innovative Drugs" plan by the State Council in July 2024. The document proposes a series of measures to promote the development of innovative drugs throughout the entire process from research and development to market application. The document emphasizes adjusting the medical insurance catalog and including innovative drugs in the second-class catalog, enhancing the dynamic adjustment and renewal mechanism of the catalog, and strengthening real-world research support for innovative drugs, which is expected to expand the coverage of medical insurance for innovative drugs. Encouraging commercial health insurance companies to invest in innovative drugs, improving multiple payment channels, further optimizing the accessibility of innovative drugs, and expanding the overall market space. It is expected that with multiple measures, the innovation vitality of pharmaceutical companies will be greatly stimulated, leading to increased research and development investment and substantial performance returns. Performance of segmented sectors this week: The pharmaceutical and biological sector rose by 1.88% this week, outperforming the Shanghai and Shenzhen 300 Index by 0.87 percentage points, ranking 9th out of 31 sub-industries. The medical research outsourcing sector saw the largest increase this week, rising by 11.3%; the hospital sector rose by 5.59%, the chemical preparation sector rose by 2.71%, the in vitro diagnostics sector rose by 2.7%, and the other biological products sector rose by 1.75%. The offline pharmacy sector saw the largest decline, falling by 3.06%, followed by the blood product sector which fell by 3.04%, the traditional Chinese medicine sector which fell by 2.97%, the pharmaceutical distribution sector which fell by 1.96%, and the medical consumables sector which fell by 0.07%. Risk warning: Risks of intensified industry competition, policy execution below expectations, and industry "black swan" events.