The Zhitong Finance App learned that CITIC Construction Investment released a research report saying that the performance of many companies in Q3 exceeded expectations, and that the performance of the device sector has reached an inflection point. They are optimistic about investment opportunities in 2027, and suggest adding a medical device sector. In the short term, individual stocks with improved performance have opportunities to fix their performance valuations. In the long run, equipment investment opportunities come from innovation, overseas, and mergers and acquisitions. The sector's innovation and internationalization capabilities have been recognized, and valuations are being reshaped. Medical services: In the medium to long term, there is still room for improvement in the penetration rate of medical services in China. Long-term, we are optimistic about differentiated medical service chains and regional medical service leaders.
CITIC Construction Investment's main views are as follows:
Medical devices: The inflection point in the performance of the device sector has arrived, and we are optimistic about investment opportunities in 2027
The performance of many companies in Q3 exceeded expectations, and performance is expected to improve in '27. The sector effect will gradually be reflected. Affected by factors such as the collection of consumables and increased medical compliance requirements, the A-share Shenwan Medical Device Index continued to decline in 2021-2024, rising and then falling in 2025, then rebounding in early 2026 and then falling. As the impact of policies is gradually clarified, and performance gradually recovers after corporate strategy adjustments, the equipment sector is undergoing both valuation and performance restoration. Q3 The Q3 revenue or profit of many companies, such as Lianying Healthcare, Huitai Healthcare, New Industries, and Microelectrophysiology, exceeded expectations. The focus was on companies that increased their performance and continued improvement in 2027, and are expected to double their performance valuations in the future. It is expected that the impact of procurement and price reduction policies in several high-value consumables and IVD sectors will gradually clear up by the end of the year or the beginning of next year, and sector-based investment opportunities will gradually become prominent.
Long-term optimism for innovation and international investment opportunities
In the long run, medical device investment opportunities come from innovation, overseas, and mergers and acquisitions. The sector's innovation and internationalization capabilities have been recognized, and valuations are being reshaped. Improved innovation and breakthrough innovative products with global competitiveness in the medical device sector are gradually being recognized. A number of companies are also actively strategically expanding the second growth curve and achieving high overseas business growth, and valuations are rising.
1) Innovation: R&D investment and technological innovation are prerequisites for the company to achieve domestic substitution and internationalization. Relying on China's engineering dividends, industrial chain and other advantages, it is easier to achieve improved innovation in medical device products, and there are many me-too and me-better. From following imitation to leading the world, some innovative medical device products in China are gradually gaining prominence internationally; after the surge in the innovative drug sector, improved innovation and breakthrough innovative products with global competitiveness in the medical device sector are gradually being recognized. There are also a number of companies actively strategically expanding the second growth curve and achieving high overseas business growth, and valuations have risen. Many US stock device companies have achieved 10-fold or 100-fold growth since their listing, and there will also be global companies in China that have grown several times in the future.
2) Going overseas: In the future, more and more investment opportunities in the medical device sector will come from internationalization, and more and more improved or breakthrough innovations in Chinese medical devices are on the international stage; the international business space is wider. Many device companies have high growth in 26H1 overseas business, and the share of international business will exceed domestic business. Companies with large long-term international business space are also expected to usher in valuation reshaping. Chinese device companies have a very broad scope for global growth. As the share of international investors in the shareholder structure increases, valuations are expected to move closer to US stock innovative equipment companies.
3) Mergers and acquisitions: Mergers and acquisitions are an important growth path for global medical device leaders, and the future will witness more and more industry mergers and acquisitions.
medical services
In the medium to long term, there is still room for improvement in the medical service penetration rate in China. Long-term, we are optimistic about differentiated medical service chains and regional medical service leaders. The impact of medical reform policies on hospitals is related to multiple factors such as DRG, collection, and price adjustments for medical services. With the gradual clarification and gradual implementation of the policy direction, leading private hospitals with strong technical strength and fine management are expected to stabilize or repair their performance in 2027.
Consumer medical services
In 2027, it is recommended to focus on the recovery in demand for medical services such as ophthalmology. With the implementation of the DRG/DIP3.0 policy, the negative impact of health insurance policies on businesses such as cataracts and basic eye diseases is expected to gradually weaken, and the demand side of consumer health care, such as refraction, is expected to gradually pick up.
Serious medical services
In 2027, some leading companies in the industry are expected to show a moderate recovery trend, and revenue growth will still depend on increased diagnosis and treatment volume, climbing new hospitals, and expanding new businesses. In principle, DRG/DIP 3.0 will be implemented by the end of March 2027. The groups are further refined, and payment support for difficult and severe cases and some innovative technologies is more accurate, which is expected to improve cost compensation for related cases; however, adjustments in patient group rules may also put pressure on payment levels for some cases, and it is still necessary to pay attention to the hospital's adaptation situation in the early stages of the switch.
Risk warning: the degree of competition in the industry is stronger than expected; industry policy risk; risk of R&D falling short of expectations; risk of falling short of expectations; risk of macro-environmental fluctuations; geopolitical risk in the Middle East.