BOCOM INTL: China Meheco Group will continue to follow the rules of bidding for batches 1-8, or may be lenient. There is sufficient short-term catalyst.

BOCOM INTL released a research report stating that the Hang Seng Healthcare Index rose by 0.5% this week, underperforming the broader market. The performance of the biopharmaceutical, prescription drug, and medical device sectors was better than other sectors. Domestic investors leaned towards defensive positions this week, with a tendency to take profits, mainly increasing positions in traditional and undervalued innovative drug manufacturers with stable internal growth. Foreign investors, on the other hand, were more active and focused on leading companies in the innovation sector and upstream of the industry chain, including innovative drugs and CXO targets. The rules for batch 1-8 centralized procurement have changed to an inquiry mode. BOCOM INTL believes that the overall price reduction under this rule may be limited, and the impact on Hong Kong-listed prescription drug companies may be less than expected. In December, the industry still has sufficient catalysts, including various academic conferences, results of healthcare negotiations, potential interest rate cuts by the Federal Reserve, etc., and sector investment sentiment is expected to be stable and rising. The bank continues to recommend focusing on the following segments: 1) Innovative drugs: companies such as 3SBIO (01530), ANTENGENE-B (06996), and BEONE MEDICINES (06160) have rich short-term catalysts and their valuation still does not reflect the core value of their main products; companies such as SIMCERE PHARMA (02096), HUTCHMED (00013), and Legend Biotech Corp. Sponsored ADR (LEGN.US) are significantly undervalued with a clear long-term growth logic; 2) CXO: leading companies in the downstream high-growth and marginally warming financing sub-tracks, such as WUXI XDC (02268); 3) Regulatory uncertainty gradually releasing reversal opportunities in sub-sectors such as hospitals, medical devices, and diagnostics.