The pharmaceutical industry has always been the most popular sector in A-shares and has a high valuation. The entire pharmaceutical industry has risen a lot last year, with a peak of 66% in 2020. Many stocks have doubled several times a year, such as vaccine stocks since last year.

, there are not a few with valuations of hundreds of times.

From the beginning of 2021 to now, pharmaceutical stocks have fallen a lot.

Since August last year, pharmaceutical stocks have begun to fall. The overall level of pharmaceutical stocks has begun to correct, with the overall level around 15%. Some problem stocks have fallen more severely, such as Asia Pacific Pharmaceuticals fell 61%, Kangmei Pharmaceuticals, the first counterfeit stock, fell.

Core Biotech fell 55%.

Even leading stocks that have always been indestructible, such as Hengrui Pharmaceuticals, Mindray Medical, Changchun High-tech, WuXi AppTec, AIER Ophthalmology, and Fosun Pharmaceuticals, have experienced many corrections.

For example, Changchun High-tech fell from a high of 513 yuan to 347 yuan, and Fosun Pharma dropped from 79 yuan to 45 yuan.

The vaccine sector also plummeted overall.

For example, Zhifei Biotech dropped from a maximum of 193 yuan to 114 yuan; Kangtai Biotech also fell from a maximum of 249 yuan to a minimum of 156 yuan; Watson Biotech fell from 95 yuan to a minimum of 48 yuan, which is not a tragedy!

After the overall correction of pharmaceutical stocks, can they still be bought?

Let’s look at the valuation first. The overall valuation of the pharmaceutical industry is still 51 times PE. My point of view is that as an index, 51 times PE is abnormal. 51 times PE for individual stocks is not a big problem, because some stocks are growing at a high speed.

, it doesn’t matter if the PE is high, the growth is okay (digesting the valuation), but as an industry, 51 times is a bit high.

China's pharmaceutical expenditures are directly linked to the growth rate of medical insurance expenditures. This growth rate has begun to correct in the past few years. It used to be very fast. In the past, the industry growth rate was 20% annualized, but now it has dropped a lot, so the PE is 51 times my own

I think A-share pharmaceuticals are relatively expensive.

Therefore, the opportunities for pharmaceutical stocks are still in individual stocks, and it is highly unlikely that a general rise will occur.

In the medium to long term, what downsides do pharmaceutical stocks face?

Obviously, centralized procurement is still needed. Most of China's A-share pharmaceutical companies are generic pharmaceutical companies. They are hit by centralized procurement, which is bad for the entire industry.

For example, the total scale of a drug may have been 5 billion or several billion before. From 5 billion to less than 1 billion after centralized procurement, the total scale has dropped significantly, and the profit rate has also dropped significantly. Therefore, centralized procurement has a great impact on generic drug companies.

The impact is significant and the trend may be irreversible.

So, where are the investment opportunities in pharmaceutical stocks?

First of all, we should choose some old leading companies and some characteristic companies. Because A-shares have been listed for so long, some traditional companies are already leaders. The most typical one is Hengrui Medicine, which is an absolute leader, including some equipment and CRO, all of which have very good performance.

The leader is just overvalued.

Even if it is expensive to buy, but the business is very good, the worst case scenario is that you lose time. Your rate of return is very low and the yield is low, but generally you will not lose money, as long as you hold it patiently.

But it will be bad if you buy the wrong one, so there is no big problem with this kind of old brand faucet qualitatively, they are all very good.

Secondly, you can pay attention to specialty companies, because there are many A-share listed companies, and the pharmaceutical industry is particularly divided into many segments. There are also some companies that have little or even no impact from centralized procurement. The most typical examples are Changchun Hi-Tech and Pien Tze Huang.

The things it sells have nothing to do with centralized purchasing. If this kind of company is cheap, you can actually consider it.

Regarding the investment strategy of pharmaceutical stocks this year, I still have to patiently wait for the valuation of leading companies to return to a reasonable level. Generally speaking, I am not too entangled in the valuation of leading companies. I do not need to plummet, rare investment value, or collapse, valuation

It is super low, a historical low. I think it is difficult to wait for this kind of opportunity. Generally speaking, when the valuation returns to a reasonable level, I will allocate a little bit. Of course, if the price falls sharply, I will increase my position.

After all, good stocks can be sold if the value is reasonable. As for whether they will create a gold pit, it depends on God's will.

I hope it will be adopted. If you have any questions, please follow me or send me a private message.