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China’s healthcare market ranks as the second largest globally and it crossed a total revenue of 10 tn yuan in 2021. The sector is experiencing rapid growth, led by rising incomes, enhanced health awareness, and a fast-aging population.
According to a China healthcare industry White Paper by China National Bureau of Statistics, Statista, and CEC Capital in 2022, the nation’s healthcare sector looks set for sustained growth in 2023 and is projected to expand at a CAGR of 9.56% between 2023-2027.
Pharmaceuticals (including biopharmaceuticals), healthcare services, and medical devices and equipment are among some of China’s largest and most significant healthcare segments.
The healthcare market is also a high-priority policy segment for the government. One of Beijing’s flagship initiatives for the healthcare industry is “Healthy China 2030” which aims for the market to expand to 16 tn yuan (approx. $2.4 tn) by 2030. In line with the ambition, China’s healthcare spending has grown massively over the last two decades across all segments. In 2021, the total healthcare expenditure more than doubled from 2015 and reached 7.6 tn yuan (approx. $1.2 tn).
Another reform model pioneered by the government a decade ago in the Fujian province was the “Sanming model”. Under this model, patients were offered drugs and treatments at reasonable costs, doctors and nurses had better pay, and it offered great savings for the government. It was so successful that the rest of the country also decided to follow.
However, due to rampant corruption and misuse of funds, ten government bodies including the National Health Commission and the Ministry of Public Security kicked off a year-long anti-corruption campaign in the medical system in late July. The crackdown resulted in several hospital chiefs and pharmaceutical executives being questioned.
However, experts believe that the clampdown would lead to a structural reboot of healthcare and help release the consumption long-suppressed due to costly medical bills. It would also enhance confidence, bring stability to healthcare services, and, maybe, even encourage births.
Several analysts opine that the corruption crackdown by the government will damage market sentiment only in the short run. In the long run, this move might solve all the latent problems and remove unfair practices prevalent in the industry. Hence, this is a much-needed reform for China’s healthcare sector.
Top Chinese healthcare stocks
As China’s healthcare sector is poised for long-term growth, we talk about three stocks in different segments of the market that investors can consider.
Shijiazhuang Yiling Pharma
Headquartered in Shijiazhuang, Hebei, China, Yiling Pharma is primarily engaged in the research and development, manufacture, and distribution of pharmaceuticals. The company’s product portfolio comprises traditional Chinese medicine, western formulations, healthcare products, and TCM slices, among others. Its medicine is dedicated to therapeutic areas of cardiac and cerebral blood disease, influenza, and respiratory disease. The company also exports products to South Korea, Vietnam, the UK, Canada, the Netherlands, Singapore, Russia, and others.
For the fiscal year ending December 2022, the company’s operating income climbed 76.9% over the year to 12.5 bn ($1.72 bn). Additionally, Yiling Pharma saw year-on-year revenue growth of 23.9%, totalling 3 bn yuan ($407.03 mn).
With a market capitalisation of 39.095 bn yuan ($5.36 bn), the company is listed on the Shenzhen Stock Exchange (002603.SZ). Its shares surged 8.43% over the past one year. Yiling Pharma boasts a PE ratio of 13.41 and a price-to-book ratio of 4.58.
Jiangsu Yuyue Medical Equipment & Supply Co.
Located in Shanghai, Jiangsu Yuyue Medical Equipment & Supply Co Ltd (Yuwell) is a medical device company manufacturing and distributing various medical equipment. Some of the company’s products include electronic blood pressure monitors, X-ray machines, air sterilization purifiers, blood glucose meters, temperature diagnostic systems, and oxygen concentrators. Nebulizer oxygen regulator, and electronic suction apparatus are some of its other products. These products are used in home care and chronic disease management fields.
The company saw a 3% year-on-year decline in its operating profit, reaching 1.6 bn yuan ($0.22 bn) in the fiscal year ended December 2022. During this same period, Jiangsu Yuyue’s revenue witnessed a 3% year-on-year increase, amounting to 7.1 bn ($0.97 bn).
Jiangsu Yuyue Medical Equipment, with a market capitalisation of 34.997 bn yuan ($4.80 bn), has its shares traded on the Shenzhen Stock Exchange (002223.SZ). Over the past year, the company’s stock has experienced a 19.54% rise. Jiangsu Yuyue shares have a price-to-earnings ratio of 14.98 and a price-to-book ratio of 3.21.
China Meheco Group Co
China Meheco Group Co is primarily engaged in operating industrial pharmaceutical, commercial pharmaceutical, and international trading businesses. The Industrial segment involves the manufacture and distribution of chemical preparations, chemical bulk drugs, and biological products, while the commercial segment wholesale and distribution of pharmaceuticals and medical devices. At the same time, the trading segment takes care of the international operations.
For the fiscal year ending December 2022, the company saw a year-on-year increase of 3.7% in its revenue earnings, reaching 37.6 bn yuan ($5.16 bn). During that same period, its operating profit came in at 1.6 bn yuan ($0.22 mn).
China Meheco Group shares are traded on the Shanghai Stock Exchange (600056.SS). The company currently holds a market capitalisation of 18.564 bn yuan ($2.55 bn). In the last 12 months, China Meheco Group stock has experienced a rise of 2.99%. Additionally, its shares are characterised by a PE ratio of 28.20 and a price-to-book ratio of 2.38.
Editor’s note: All stock movement figures as of October 9, 2023.
