2016 performance in the first half of the year: The weakness continues but the situation is slightly improved。

 

  Continuous policy reforms are like two votes、Limitation of Auxiliary medication and the effect of price pressure，Although some companies have rebounded，But the overall industry's performance continues to weak。The overall income of the pharmaceutical industry is 10%year -on -year in the first half of 2016，slightly improved from 9.1%in 2015，Some orders that have accumulated Stake Sports Bettingdue to the 4th quarter of 2015。But the revenue of companies listed in Hong Kong in Hong Kong increased an average of 9.4%in the first half of 2016，Below the overall growth rate of the industry，We believe that it is mainly due to the exfoliating of the distributor due to the two -vote system，The price caused by the bidding of the drug fell，Strict supervision of overdose prescription drugs，and the progress of the bidding of drugs slower than expected limited the growth of new products。

 

  The destocking caused by the two -vote system will continue in the second half of 2016。Simply speaking，The two -vote system requires that pharmaceutical manufacturers use only one layer of distributors to distribute the medicine to the hospital (from manufacturer to distributors as one vote，From the distributor to the hospital for one vote)，It aims to reduce non -necessary distribution costs and marketing activities that are not monitored。Although the two -vote system has not been formally implemented，But it has caused some smaller distributors to close，The completion of small distributors indirectly caused the destocking of the pipeline，It brings adverse effects on the performance of some manufacturers dependent on third -party distributors in the first half of 2016。The expected two -vote system will be promoted to more pilot provinces，stake betting appThe problem of pipeline destocking will continue in the second half of 2016，Chinese Medicine、Fourth Ring and other pharmaceutical companies will continue to be affected。

 

  Price decline within expected，The effect will emerge in the second half of 2016。The bidding price completed in the first half of the year is roughly within market expectations，But because only a few provinces implemented the new tender results in the first half of the year，We believe plus the acceleration of the bidding of drugs，The impact of price decline will emerge in the second half of 2016。

 

  Further supervision of auxiliary drugs/large -scale drugs。So far, 9 provinces have launched a monitoring list of auxiliary drugs or large -scale drugs，The government has a clear direction to reduce China's excess prescription drug problem。If stricter supervision is launched in more provinces，Pharmaceutical companies with the main products are listed in the list such as Shenwei、Fourth Ring Road and Middle School Pharmaceuticals will continue to be hit。

 

  Industry challenges continued but gradually saw the dawn。Although the operating pressure of the industry is expected to continue in the second half of 2016，But we believe that the growth rate of the industry has reached Valley and expected to start improvement in the fourth quarter: (1) It is expected that drug bidding will be completed in most provinces，stake sports betting appUncertainty of removal of drug prices，(2) Completion of the destocking of the sales pipeline，(3) The low base number of the second half of 2015 and the first half of 2016。Sentences，We believe that in 2016 should be a year of industry policy reform，Pay the way for the healthy development of the healthier in the future。

 

  The pharmaceutical industry has been behind the market since 2016。Due to the weak industry growth，The stock price of the pharmaceutical industry listed in Hong Kong has been behind the market since 2016，The main pharmaceutical company has fallen by about 4%since 2016，About 8%of the same period of the Hang Seng Index。

 

  Valuation premium is still high。The current price of the pharmaceutical industry in 2016 forecast the price -earnings ratio is 20.2 times，Compared with the Hang Seng Index 2016 prediction of 55.1%premium at 13 times the price -earnings ratio，Although the industry growth has weakened，But the premium of the sector is still higher than the average value of the HSI from 2014 to the present。We believe that the valuation premium is mainly due to the slower profit growth forecast。

 

  Leading pharmaceutical companies with high potential products will have more advantages。The expected policy pressure continues most of the time in the second half of 2016，We believe that pharmaceutical companies with high potential products will be less affected by policy，Therefore, stake online sports bettingwe believe in stone medicine、Kang Zhe，East Sunshine and Hao can still maintain a higher level of growth。