中国制药行业-有吸引力的估值；创新支持增长

Disclosures & Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it. Issuer of report: HSBC Qianhai Securities Limited View HSBC Qianhai Securities at: https://www.research.hsbc.com Equity Research Report Voting opens 1June – 29JulyIf you value our service and insightVote nowAsiamoney Brokers Poll 2022  Pharma has steady earnings growth, healthy cash flow, and attractive valuation  Innovation is the key industry growth driver to help ease pricing pressure and policy uncertainties; we detail four key debates  We prefer SBP, CSPC, Fosun Pharma-H (all Buy); downgrade both Luye and United Laboratories to Reduce (from Buy) Attractive valuations with upside potential. We believe pharma stocks are a good defensive play in this turbulent healthcare market, with steady earnings growth, healthy cash flows, and attractive valuations. Progress in pandemic-related products could offer upside for some companies. 2021 financial results were mixed, mainly due to pricing pressure from China’s volume-based procurement (VBP) mechanism and increased expenses, which offers a low base for pharma to grow in 2022e, in our view. We believe the key drivers for the sector are high growth in innovative drugs, new drug launches, and market consolidation. Due to investor concerns around the healthcare sector, pharma stocks have corrected 42% since 2H21 (vs the CSI300 down 23% over the same period), with the overall sector trading at more than 1 SD below its historical average. Innovation offsets VBP pressure on generics. Pharmas are growing their innovative pipelines via internal R&D and external business development. Specifically, (1) based on various annual reports, R&D expenses grew at a 2019-21 CAGR of 32% on average as they built up domestic and global R&D capabilities, including new platforms such as mRNA, antibody-drug conjugates (ADCs), multi-specific antibodies, and pharma AI; (2) most pharmas are actively involved in business development projects such as licensing-in or out of new drugs and investment in biotechs. We expect continued industry consolidation through business development and M&A, considering the attractive valuations of biotechs; pharmas are the main beneficiaries with their strong commercial infrastructure and sufficient cash on hand. VBP-wise, we see easing pressure as the biggest wave of VBP for drugs has already passed. We also detail the four key debates for the industry. Earnings revisions. We adjust our financial forecasts for covered pharma companies based on 2021 financial results, the VBP impact, and regulatory changes. We adjust our 2022-23e earnings estimates by -44% to 3%. We cut our forecasts for Hengrui, Luye, and United Lab and for others to factor in VBP pressure on key drugs and increased expenses. See Exhibit 2 for the detailed forecast changes. Three preferred stocks, two downgrades. We prefer stocks with high growth