Guosen: Consumer healthcare is expected to transition from valuation differentiation to value reassessment, seeking high-quality targets in the sector that are undervalued.

Guosen has released a research report stating that the supply side of the consumer healthcare industry is accelerating the clearing and consolidation, with the valuation anchor shifting from high single-client prices and scale expansion to efficiency of individual hospitals and same-store performance, repurchase rates, cash flow, and capital returns. The common answer in mature markets is to promote the orderly transition of medical demand to outpatient care, communities, and homes within the framework of security and regulation. With operational metrics gradually improving, industry clearing progressing, and the development paths of mature markets being validated domestically, the consumer healthcare sector is expected to shift from valuation divergence to value reassessment. The main points from Guosen are as follows: The domestic consumer healthcare market is transitioning from scale expansion to a period of operational quality validation. Consumer healthcare represents the consumption expression of essential medical needs within residents' autonomous choices, service experiences, and family settings. The aging population, the expansion of chronic illness demographics, and the increased utilization of medical services continue to support long-term demand; however, in the context of tightened medical insurance cost control, price governance, and compliance regulation, the expansion of institutions, stores, and products has become difficult to directly convert into profit growth. The industry's supply side is accelerating its clearing and consolidation, with the valuation anchor shifting from high single-client prices and scale expansion to efficiency of individual hospitals and same-store performance, repurchase rates, cash flow, and capital returns. The common answer in mature markets is to promote the orderly transition of medical demand to outpatient care, communities, and homes within the framework of security and regulation. The United States constrains medical consumption through insurance networks, cost-sharing, and price transparency; Japan positions self-medication and home health management as supplements to universal health coverage; Europe relies on product classification, pharmacy services, and payment mechanisms to collectively meet low-complexity demand. Overseas experience shows that the maturity of consumer healthcare depends on the simultaneous improvement of payment stratification, professional responsibility, and continuous service capabilities; China's next phase of growth will increasingly come from enhancing existing networks and realizing service capabilities. The three main lines of medical services, chain pharmacies, and home medical devices have transitioned from general expansion to structural opportunities, coexisting low-valued assets with high growth flexibility. 1) Medical Services: With slowing revenue growth, industry competition is shifting from high single-client prices and new hospital expansions back to patient volume, medical quality, efficiency of individual hospitals, and capital returns. 2) Chain Pharmacies: The industry has entered a phase of inventory competition, as store expansion yields to same-store growth, prescription acceptance, category management, membership repurchase, and cost control. 3) Home Medical Devices: The market foundation has already formed, with the growth focus shifting to low penetration, high growth, and repeatable subcategories, extending from one-time equipment sales to continuous health management. As operational metrics gradually improve, industry clearing progresses, and the development paths of mature markets are validated domestically, the consumer healthcare sector is expected to shift from valuation divergence to value reassessment. Investment Recommendations Jade seeks a good price in the box, a hairpin waits to soar within the case. For medical services, it is advisable to focus on companies with stable service capabilities, strong operational quality, or high restorative flexibility, such as Aier Eye Hospital Group, GUSHENGTANG, and HYGEIA HEALTH; for chain pharmacies, it is recommended to pay attention to companies with low valuations, superior capital returns, or significant operational recovery potential, such as Yifeng Pharmacy Chain, DaShenLin Pharmaceutical Group, and LBX Pharmacy Chain Joint Stock; for home medical devices, it is advisable to focus on companies with a low valuation base, multi-category capabilities, or high growth elasticity in specific segments, such as Jiangsu Yuyue Medical Equipment & Supply, BMC Medical, and Cofoe Medical Technology. Risk Warning: Consumer improvement may fall short of expectations, industry competition may intensify, product development may not meet expectations, and risks of policy fluctuations.