Leading Elderly Health Stocks

Tonghua Dongbao and Xinlitai in the field of chronic disease medication, Xiangyu Medical in the field of rehabilitation equipment, Yuexin Health in the field of elderly care services, and Wanda Information in the field of smart elderly care. No target can firmly occupy the position of "first leader", and the choice of leader under different investment logics varies greatly.

I didn’t just make this up from a research report. Last month, I did a little half-month of downstream research with my friends from the securities firm’s pharmaceutical group. We visited everything from high-end retirement communities in Pudong, Shanghai, to community health service centers in Subei County, Jiangsu. People with different roles have completely different definitions of “leading”, so different that they can go around two streets.

I spent a whole morning in the rehabilitation department of a community health service center in Wuzhong District, Suzhou. A room full of elderly people on crutches and wheelchairs were queuing up. The medium-frequency therapy devices, standing frames, and rehabilitation training devices they used were all products from Xiangyu Medical. Director Li of the Rehabilitation Department told me that in the past two years, the health centers in their entire district have given priority to Xiangyu when replacing rehabilitation equipment. Firstly, it is more than 40% cheaper than imported brands. Secondly, the after-sales point is in the urban area. If there is any problem with the equipment, someone can come and repair it on the same day. It is much more reliable than those small brands. This is also the consensus of many fund managers who invest in high-end manufacturing - Xiangyu's domestic public rehabilitation equipment market share will exceed 13% in 2023, firmly ranking first. The downstream demand is solid and the performance is waterless. This is the real leader.

But the last time I talked about this with an old stock investor who has owned pharmaceutical ETFs for almost 6 years, he rolled his eyes and didn't agree at all: "When did the biggest expense for the elderly turn to rehabilitation equipment? Taking medicine for chronic diseases is the most urgent need. ”What he said is not unreasonable. According to the seventh census data, the prevalence of chronic diseases among people over 60 years old in my country is as high as 75%. There are more than 130 million people with diabetes alone, 90% of whom are middle-aged and elderly people. The market share of Tonghua Dongbao's second-generation insulin has remained above 35% all year round, and the growth rate of its third-generation insulin exceeded 40% last year. Its annual cash flow is stable and is almost unaffected by the economic cycle. In the eyes of an investor like him who seeks stability, only chronic disease drug companies that can make real money deserve to be called the core leader in the elderly health track.

Some friends who are engaged in primary market pension investments directly poured cold water on us, saying that these so-called "leaders" are all phased, and the entire industry has not yet reached the absolute leader. If you look at the annual reports of these companies, you will know that for many elderly care service providers, more than 40% of their revenue comes from local government operating subsidies. For example, Yuexin Health’s revenue from the entire nursing home segment in 2023 will be just over 300 million, accounting for less than 20% of total revenue. Most of its profits are still supported by its previous building materials business. It is a bit premature to call it the leader in elderly care services now.

I have been investing in the pharmaceutical sector for more than three years. To be honest, I think there is no need to argue about who is the absolute leader now. This track is too broad. From the daily anti-hypertensive drugs and anti-diabetic drugs, to the equipment used for rehabilitation, to the retirement community where you live, and the health monitoring bracelets you use every day, the business logic of each link is not even the slightest bit different. Just like you can't say who sells rice or houses is the number one leader in the consumer industry, in the future, the elderly health track will definitely be a pattern where multiple segmented leaders coexist.

Of course, I have to remind you that the "only leader in elderly health" promoted by many stock recommendation accounts on the Internet is basically a speculation concept. In many stocks, the revenue related to elderly care in the main business accounts for less than 10%. It is purely a speculation. If you really want to invest in this track, don't just blindly buy based on the name of the "leading company". First, read two annual reports to see its proportion of pension-related income, and then go to a community nursing home near your home to ask what equipment they use and what brands of chronic disease drugs they often purchase. It will be more useful than reading 10 highly hyped research reports. After all, this track has really long slopes and thick snow, but it also has a lot of pits.