In July, due to the forthcoming “12th Five-Year Plan for Biomedicine” and the implementation of antibiotic management measures, the pharmaceutical sector in July caused the entire pharmaceutical sector to outperform A-shares for the same period in July. A-shares fell 0.28% over the same period, and medicines rose 6.83%; in July, As of July 28, Huachuang Pharmaceutical Group rose 14.08%, outperforming the pharmaceutical index by 7.04%, and outperforming A shares by 14.36%.

From January to May of this year, the growth rate of the pharmaceutical industry's revenue increased 29.32% year-on-year, by 1.5 percentage points year-on-year; total profit increased by 19.55%, a sharp drop from the same period last year. We believe that there is a bottoming trend in the current slowdown, mainly because on the one hand, Suizhong Pharmaceutical fraud may change the current tendering policy only the price bid, the downward trend of drug prices will slow down, and some basic drug prices are expected to be raised; This is because last year's pharmaceutical industry showed a high growth rate and a low growth rate. Therefore, this year will be a growth trend of low growth and high growth. Third, the "12th Five-Year Plan for Biomedical Industry Revitalization" is expected to come out. The negative factors in the industry are gradually digested, and favorable factors are expected to be introduced. With comprehensive judgment, we believe that the growth rate of more than 25% in the year is more certain.

At present, the current price-to-earnings ratio (integral method) of the pharmaceutical sector is 28 times, and the valuation is relatively reasonable, but individual stocks are significantly different. Investors are advised to pay attention to the mid-year report, row "Ray" to find "false pit", and actively arrange individual stocks, waiting for the opportunity of the plate.

In August we propose standard or appropriate overweight growth determination; individual stocks with major topics and fundamental support. Focus on the growth of traditional Chinese medicine products: Pien Tze Huang; with major innovations: Chongqing Brewery, Lansheng Co., Ltd., and Hisun Pharmaceutical; good fundamentals and integration and acquisition expectations: China Animal Husbandry Co., Ltd., Shuanghe Pharmaceutical Co., Ltd.; Good growth stocks: Shutai God

However, in the long term, due to the improvement of the medical insurance system and the aging, the expansion of the medical market in China will be accelerated, and the general trend of growth in the pharmaceutical industry will not change. We continue to adhere to the following perspectives of sub-sectors that have better development prospects: 1. Exclusive quantities of essential drugs with prominent status: Shuanghe Pharmaceutical, Guangzhou Pharmaceutical, Yunnan Baiyao, Ma Yinglong and Zhongxin Pharmaceutical; 2. Significant innovations Investment Opportunity: Chongqing Beer, Hainan Haipiao; 3. Innovative bioproduct manufacturing companies: Changchun Hi-tech, China Animal Husbandry Co., Ltd., Tiankang Biotechnology, Shuanglu Pharmaceutical Co., Ltd., and Hanyu Pharmaceutical Co., Ltd.; 4. Enterprises with restructuring themes: Tai Chi Group, Baiyun Mountain, Shuanghe Pharmaceutical, Xinhua Medical, etc.; 5, Traditional Chinese medicine health products and traditional Chinese medicine: Dong'e Ejiao, Pien Tze Huang, Yunnan Baiyao.