The Zhitong Finance App learned that BOC International released a research report saying that the Hong Kong stock pharmaceutical industry emerged from an independent market in August (Hang Seng Healthcare Index +9.3% vs. Hang Seng Index -1.2%). The bank believes it is mainly related to performance exceeding expectations and the market's more optimistic fundamental expectations. Looking ahead to 2H26, the bank believes that the sector is expected to continue to recover, but internal segmentation or increase. When selecting stocks, it should return to fundamentals and valuations, and focus on targets that have been undervalued during the crisis. It is recommended to focus on the following segmentation directions: 1) innovative drugs; 2) CXO; 3) gradual easing of policy uncertainty, gradual implementation of superposition policy benefits, and hospitals with opportunities for reversal.
The main views of BOC International are as follows:
The pharmaceutical industry's revenue has grown steadily, and multiple benefits have contributed to a significant improvement in profit performance
1H26 The overall revenue of the Hong Kong/A-share pharmaceutical industry increased by 4.7%/3.2%, which is at a steady level compared to 2025 (6.9%/0.7%). The overall profitability of the industry has improved. The net profit/A share non-net profit growth rate (26.7%/19.5%) of Hong Kong stocks was significantly higher than revenue, and there was a further acceleration compared to the full year of 2025 (20.3%/-9.2%), reflecting the concentration of favorable factors such as increased sales contribution of high-margin products, increased operating leverage under high prosperity in the innovative industry chain, and a rebound in the performance of previously pressured sub-sectors.
The innovative drug industry chain leads the industry in growth, and the service sector is recovering
Among various sub-sectors, the innovation industry chain continues to lead the industry: 1) The overall revenue of Hong Kong equities/A shares CXO increased by 29.2%/25.3%, and net profit (after deduction) increased by 23.4%/67.6%, leading the growth rate in all sub-sectors. Exchange rate fluctuations put some pressure on apparent profit margins, but the overall prosperity of the industry and order demand were high. 2) The core pharmaceutical sector (chemicals+biopharmaceuticals) saw revenue growth of 17.8%/3.4% and profit growth of 62.7%/35.0%. The growth rate of Hong Kong stocks far surpassed that of A-shares. The bank believes that Hong Kong stock innovation pharmaceutical companies (prescription pharmaceutical companies transforming biotechnology and innovation) account for a higher share. Among them, the growth rate of biopharmaceuticals far exceeds that of chemicals, and their share in the sector's revenue has further increased. 3) As the effects of health insurance fee control/collection and declining demand gradually ease, there is a recovery trend in the performance of the hospital, equipment, diagnosis, and vaccine sectors. 4) Under multiple influences such as collection/price reduction, weakening demand, and increased competition, the blood products and traditional Chinese medicine sector continues to be under pressure.
Profit expectations for 2026-27 have improved strongly
Affected by strong mid-term performance, the market is more optimistic about the short-term performance of pharmaceutical companies. Sellers of the August MSCI China Healthcare Index 2026/27 EPS agreed to increase by 7%/4%, respectively, and the growth rate is expected to stabilize above 20% for the next 2 years.