This year, the Hong Kong innovative pharmaceutical sector has delivered remarkable performance. As of August 26, the CSI Hong Kong Innovation Pharmaceutical Index (HKD) (Code: 931787.CSI) has surged 113.88% year-to-date, though market concerns about the sustainability of this rally have emerged recently. (Past index performance does not represent future results and does not equal actual product returns. Investment involves risks.)
Regarding this development, Liang Furui, fund manager of Great Wall Medical Industry Fund, believes that while the Hong Kong pharmaceutical industry encompasses various sub-sectors, the strong performance of innovative pharmaceutical stocks this year can be attributed to two main factors: First, pharmaceutical valuations had been significantly suppressed in the past. For the innovative pharmaceutical sector specifically, whether compared within the pharmaceutical sector or against other technology assets, the historical discount was quite evident. Therefore, this year's rally represents a normalization of previously compressed valuations. Second, many innovative pharmaceutical companies have experienced fundamental improvements this year, including product volume growth and profitability, inflection points in financial performance, and major overseas licensing deals. These two factors have jointly driven the innovative pharmaceutical rally, and currently, this supporting logic remains unchanged.
Liang Furui further noted that due to the AH premium differential, AH pharmaceutical companies trade at different valuations. For innovative pharmaceutical stocks, A-share innovative pharmaceuticals trade at approximately 4x PS multiples, while Hong Kong innovative pharmaceuticals trade at around 3.5x PS multiples. The current innovative pharmaceutical rally has no fundamental connection to changes in other pharmaceutical sub-sectors. However, if BD (business development) logic continues to materialize and IPOs gradually open up and accelerate, this could spark a new wave of innovation enthusiasm in the innovative pharmaceutical industry.
From a longer-term perspective, Liang Furui believes that China's aging population trend is evident, potentially leading to increased incidence rates of chronic and degenerative diseases. Additionally, the "younger onset" of chronic conditions such as hyperglycemia, hypertension, and obesity has become relatively common, increasing long-term medication demand. These typical diseases have all become popular pipelines for innovative drug development, making innovative pharmaceuticals an industry with substantial long-term demand potential. Therefore, the long-term investment value of innovative pharmaceuticals is worth anticipating.
Disclaimer: The information contained in this communication is sourced from channels the company considers reliable and individual researcher judgments, but the company provides no direct or implied statements or guarantees regarding its accuracy or completeness. This communication is not a complete representation or summary of the relevant securities or markets, and any opinions expressed may change without further notice. This communication should not be accepted by recipients as a substitute for their independent judgment or as a basis for investment decisions. The company or its related institutions, employees, or agents assume no responsibility for any actions taken by any person using all or part of this content or any losses resulting therefrom. Without prior written permission from Great Wall Fund Management Co., Ltd., no person may distribute, reproduce, reprint, or publish this report or any part thereof in any form, nor make any deletions or modifications to this communication that contradict its original meaning. The fund management company reminds that every citizen has the obligation and right to report money laundering crimes. Every citizen should strictly comply with relevant anti-money laundering laws and regulations. Funds involve risks, investment requires caution.
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