Medical devices: the golden Decade of domestic substitution logic

2022-05-18 0 By

In the whole pharmaceutical and health industry, it can be simply divided into chemical drugs, Traditional Chinese medicine, biological products, pharmaceutical business, medical devices and pharmaceutical biological six tracks.If divided into two categories of “medicine” and “medicine”, chemical drugs are the absolute main force of “medicine”, and related listed companies account for one third of the listed companies in the medical and health industry.And in “medicine”, medical equipment is the absolute main industry.In the history of A shares, medical devices is one of the few industries that has tenfold in A decade.According to the statistics of “China Medical Device Blue Book”, the compound growth rate of medical device in recent years remains at about 20%, and it is expected to grow at about 10% in the future. The industry has a high Beta, and it is a long-term investment track with strong certainty and fast growth./01 Medical Device Industry Index There are dozens of various industry and theme indexes related to the medical and health industry, and the correlation between each index is high, among which the constituent stocks are concentrated in medical devices and the representative one is the All-finger Medical Device Index (H30217.CSI).The medical device Index selects the medical care equipment and supplies industry stocks in the WHOLE index of China Securities To reflect the overall performance of the industry stocks. At present, the index contains 66 constituent stocks, accounting for more than 2/3 of all listed medical device companies.From the perspective of the weight stocks of medical devices, Mindray Medical, as the absolute leader of medical devices in A-shares, has A relatively large weight in the index. The top ten weight stocks except Mindray Medical are scattered, with the overall weight of the top ten weight stocks accounting for less than 50%.In terms of market value, medical devices are dominant. The total market value of mindray Medical, the leading enterprise, accounts for nearly half of the total market value of the industry, and the floating market value accounts for about 1/3 of the total floating market value of the industry.Among the 66 constituent stocks, 24 companies are worth less than 10 billion yuan, and 17 companies are worth 10 billion to 20 billion yuan. It can be said that small and medium-sized companies account for the majority.This also basically reflects the current situation of the domestic medical device industry, that is, small scale and low industry concentration.At present, there are more than 20,000 medical device manufacturers in China, but the enterprises with a scale of more than 20 million only account for about 10%. By contrast, the annual output value of the world’s top 10 medical device enterprises is about 300 billion DOLLARS, while the total output value of the top 10 domestic medical device enterprises is only about 100 billion yuan.From the perspective of industry distribution of medical device index, consumables, equipment and in vitro diagnosis are basically three parts of the world.Globally, these three segments are also the largest and largest segments in the medical device industry by value.It is worth mentioning that in addition to consumables, equipment and in vitro diagnosis, medical aesthetics consumables, which is a segment industry with rapid growth in scale in recent years, the typical representative of listed companies is Love America, this new medical consumption service is also expected to become high-end “addictive” consumer goods like liquor./02 Valuation and Profitability of Medical Devices Medical devices have always been relatively optimistic by the capital market because of the dual attributes of consumption and scientific and technological innovation, and their valuation is also high.If starting from the date of the medical Device Index’s release in July 2013, the median long-term estimate of the index is around 60x, the current PETTM is 27x, and the historical loci is only 0.68%, which looks like an area of absolute undervaluation.However, this is not the case. Due to the imperfection of past index compilation and different stages of industry development, medical devices have maintained a very high valuation level until 2019.However, with the implementation of the collective procurement plan, the profitability of the medical and health industry as a whole is facing the possibility of decline, and the valuation will also decline.Medical devices are no exception, and the valuation of more than 60x is hardly an “anchor” of average valuation in the current view.If we take the pilot time of medical procurement (April 2019) as the starting point, the median valuation of the medical device industry is about 40X. The current index PETTM is 27X, which is significantly lower than the historical valuation level of the industry.Behind the decline in valuation is the institution’s pessimistic expectations for the future profitability of medical devices.From the profitability of the medical device industry index in the past few years, the industry as a whole has achieved an average annual growth of more than 40% in both revenue and net profit due to the explosive growth of the epidemic demand for medical devices.However, under the influence of a high base and the expectation that the impact of the epidemic will recede in the future, the institutions’ consensus forecast for future growth is pessimistic./03 Investment prospect of medical device Industry From the perspective of global market distribution, Europe and America occupy nearly 70% market share in the medical device market, while China’s global market share is about 15%, and most of them are low-technology and low-value consumables. However, with the development of the domestic medical device industry in recent decades,China has become an important production base of medical devices in the world, and ranks first in the world in the output of a variety of low-end medical devices.For the foreseeable future, medical devices are still a high-growth gold industry.From the perspective of supply and demand, medical equipment is an industry with huge demand and relatively scarce supply.In terms of demand, on the one hand, China’s huge aging population brings about the demand for medical services.On the other hand, the domestic substitution of domestic medical equipment for foreign products, especially the domestic substitution of high-end core medical equipment, which is similar to equipment in other walks of life.At the supply level, medical devices have relatively high technical barriers and policy barriers, and the examination and approval system and patent system make the competition pattern of medical devices better than many industries such as consumption.In addition to the demand factors brought by population aging, the policy also drives the rapid development of domestic medical devices. The medical reform policy limits the proportion of drugs in hospital income. From the proportion of the two, medical devices will inevitably become an important income of public hospitals.At the same time, the reform of the medical system brought about by the epidemic will greatly increase the demand for medical equipment and further increase the demand for medical equipment./04 Investment risk Although the medical device industry is an industry with consumption certainty and technological innovation in the long term, from the second half of 2020, the medical device index has shown a trend of fluctuation and decline, and the whole industry is facing new risks.At present, the most important risk is the policy end of the “collective procurement”, especially the high-value consumables of the collective procurement scheme.From the introduction of intensive procurement plans in the past two years, once the implementation of intensive procurement plans for a certain class of drugs or consumables is implemented, it will have a huge impact on the income of the whole subdivision industry, and the performance of relevant enterprises is bound to be affected.In addition, although the r&d investment of medical devices is less than that of drugs and the r&d cycle is shorter, they also face a lot of R&D risks. Once the r&d investment fails to generate revenue that can cover the cost, there will be a great risk to the enterprise performance.Logic and the medical investment: based on the value of the investment field, the author: Dai Guangyu editor, skill, GongChengYu, Liu Xia compiled the book will be of medical health in the field of biological medicine, medical equipment, medical institutions, medicine, cosmetic, medicine, business investment logic to conduct a comprehensive analysis, five industries for investment opportunities for readers from all walks of life to explain.Disclaimer: If the video, picture and text used in this article are related to the copyright of the work, please inform us immediately. We will confirm the copyright according to the proof materials you provide and pay remuneration according to the national standard or delete the content immediately!