Pharmaceutical equipment industry research in pharmaceutical industry: domestic substitution space is broad

1 Industry: Domestic equipment import substitution, the industry ushered in rapid development

1.1 Pharmaceutical enterprises opened a new round of fixed asset investment, and the pharmaceutical equipment industry ushered in an inflection point

All kinds of machinery and equipment used in the production of pharmaceutical enterprises are collectively referred to as pharmaceutical equipment, pharmaceutical equipment includes eight categories, respectively, raw material medicine machinery and equipment, preparation machinery, pharmaceutical crushing machinery, decoction machinery, pharmaceutical water equipment, pharmaceutical packaging equipment, pharmaceutical testing equipment and other equipment. From the perspective of market share, pharmaceutical packaging equipment accounted for more than 50%, followed by raw material pharmaceutical machinery equipment, preparation equipment, tablet equipment, etc., pharmaceutical crushing machinery and pharmaceutical water equipment accounted for a relatively low proportion.

In recent years, the growth rate of China's pharmaceutical manufacturing assets began to rise. Since 2000, China's pharmaceutical manufacturing industry has experienced two rounds of GMP certification, of which the second round of GMP began in 2011, to promote pharmaceutical companies to increase investment in fixed assets, 2011-2015, the total asset growth rate of pharmaceutical manufacturing industry remained at about 15%. In 2016, the growth rate gradually declined, and by the end of 2019, it has dropped from the previous 15% to the lowest 7.2%. After 2020, the overall growth rate of assets continued to rise, gradually rising from the lowest 7.2% in 2019 to 14.7% in June 2021, and the upward trend is expected to continue.

From the perspective of the overall sales of the industry, since 2010, benefiting from the new GMP certification, downstream pharmaceutical companies have increased investment in fixed assets, driving the rapid development of the upstream pharmaceutical equipment industry, and the industry growth rate has exceeded 20%. With the fixed asset investment of pharmaceutical companies gradually coming to an end, the sales of the pharmaceutical equipment industry have peaked and fallen since 2016, and the industry growth rate is about 15% from 2016 to 2019, and the industry growth rate will rise to about 20% in 2020.

China's pharmaceutical equipment industry started in the 1990s, the first round of GMP certification in 2004 has greatly promoted the development of the industry, and the second round of GMP certification began in 2011 to promote the rapid development of the industry again. In recent years, the rapid development of China's biopharmaceutical industry has accelerated the investment in fixed assets of biopharmaceutical enterprises. At the same time, domestic pharmaceutical equipment enterprises have made breakthroughs in the research and development and production of biological drug equipment, and the new coronavirus epidemic in 2020 has accelerated the import substitution of domestic pharmaceutical equipment, and the industry has ushered in the third rapid development.

1.2 The pattern of China's pharmaceutical equipment industry is scattered, and the concentration degree needs to be improved

The number of pharmaceutical special equipment manufacturing enterprises in China has increased year by year, from 27 in 2000 to 147 in 2020. From the trend point of view, since 2016, the industry has entered a downward cycle, and the number of enterprises has also declined year by year, and by the end of 2019, the number of enterprises has begun to increase again, reaching the current 147. At present, the competitive pattern of China's pharmaceutical special equipment manufacturing industry is relatively scattered. We estimate that the market share of leading enterprises Dongfulong (13.770, -0.48, -3.37%) and Chutian Technology (8.140, -0.50, -5.79%) in 2020 will not exceed 5%. The competitive pattern of China's pharmaceutical special equipment manufacturing industry is still relatively scattered, and the concentration still has room for improvement.

1.3 The outbreak of biological drugs, the demand for biological macromolecule production equipment continues to accelerate

The gross profit margin of biological drugs is about 90%, and the cost accounts for about 10%, of which direct materials account for about 25%, direct labor accounts for about 15%, and manufacturing expenses account for about 60%. In 2020, the global biopharmaceutical market size is 313.1 billion US dollars, assuming that the gross profit margin is 90%, and equipment and consumables are counted in manufacturing expenses, the global equipment and consumables market size is 18.7 billion US dollars in 2020, and Frost and Sullivan is expected to maintain an 8%-10% growth in the next five years.

In 2020, the market size of China's biological drugs is 387 billion yuan, assuming that the proportion of domestic biological drugs reaches 75%, the gross margin is 90%, and the equipment and consumables are counted in the manufacturing expenses, then the market size of China's biological drug equipment and consumables will be 17.5 billion yuan in 2020, considering that China's biosimilar drugs are currently in the outbreak stage. It is expected that the market size of China's biological drug equipment and consumables is expected to maintain more than 20% growth. From the perspective of some biological drug enterprises, their fixed asset investment has been growing rapidly in recent years. The production difficulty of biological drugs is relatively high, and from the international situation, biological drug companies generally prefer to build their own production capacity. At present, the domestic biopharmaceutical industry is in the explosive stage, the number of small biopharmaceutical enterprises is increasing rapidly, the listing speed of biopharmaceutical continues to accelerate, and the investment demand for fixed assets of enterprises is increasing rapidly, which will bring the development of China's pharmaceutical equipment industry.