Alternative Elixir for Your Portfolio
In China, Firms That Make
Traditional Medicines Have
Solid 'Long-Term Prospects'
HONG KONG -- For an offbeat long-term play in the health sector, investors here can add a little dried larvae to their portfolios.
Traditional medicines remain part of the fabric of Chinese life, even as multinational pharmaceutical companies that entered the market decades ago have made inroads. Considered alternative treatments in the West, they are regularly recommended in China by doctors and covered by insurance.
Among the many makers of traditional Chinese medicines, Tong Ren Tang Technologies, a Hong Kong-traded unit of China Beijing Tong Ren Tang Group, stands out. For centuries, the company served the royal court of the Qing Dynasty, which ended in 1911.
The brand is a household name in most of China, not unlike Tylenol in the U.S. Chinese medicine is traditionally sold by a specialist at a local shop that concocts mixtures of dried plants and animal products from wooden boxes behind the counter. One Tong Ren Tang store in Hong Kong sells everything from the thinly sliced horn of a young deer, which doctors say helps kidney problems, to an 85-year-old wild ginseng root that can be ground into a powder and used for heart failure -- selling for 1.08 million Hong Kong dollars, or about US$138,700. There are dried larvae for asthma as well.
Like most in the sector -- which includes Guangzhou Pharmaceutical and Tianjin Tasly Pharmaceutical, both traded in Shanghai -- Tong Ren Tang is small. It posted earnings of 231 million yuan (US$29.2 million) on 1.1 billion yuan in sales last year. That is up from a profit of 205.6 million yuan on 983.2 million yuan in sales in 2004.
"The overall expenditure on drugs will increase tremendously in the long term," says Gideon Lo, an analyst who follows Tong Ren Tang at DBS Vickers in Hong Kong. "Tong Ren Tang is the leader. ... If you are bullish on the long term, you must buy the market leader."
The company's stock price has slipped recently and is well off its 52-week high of HK$17.90. The shares, which trade in Hong Kong, closed up 2.6% to HK$13.40 on Friday.
Some analysts attribute the drop to an expected decline in 2006 earnings. Sales of Chinese traditional medicines in general have slowed this year, according to one fund manager in Hong Kong who has spoken with some of the companies. The government is trying to tamp down drug prices nationwide to make medicines more affordable, squeezing profit margins for traditional and Western medicines alike.
"This probably won't be TRT's finest year," Wu Rui, an analyst with Nomura in Hong Kong, wrote in a research report this summer. But she added, "We see long-term prospects bolstered by an extensive product range, solid distribution and a strong brand."
The company is focused on marketing and packaging centuries-old formulations as pills in boxes and bottles, and has been able to leverage its brand name to sell those products, most of which sell in China for a dollar or two each.
One of its blockbusters is a general health formulation called Liu Wei Di Huang, a combination of six ingredients that sells in Hong Kong for HK$60 for a bottle of pills. The product had sales of 369 million yuan in 2005.
People like the pills because they are more convenient than the loose ingredients. "It's easier to take," says Liu Wen Bao, a medicine consultant for Tong Ren Tang. "Life is very busy. So these are very popular."
Chinese people also are increasingly turning away from hospitals and doctors to pharmacies for minor coughs and colds, fueling a booming market in over-the-counter medicines. The market for those drugs grew 11% in 2005 to around 50 billion yuan, according to the London market-research firm Euromonitor International. Nearly 80% of Tong Ren Tang's products are sold directly to consumers at pharmacies across China.
"The growth prospects for the company are sound, as we believe domestic consumption will become the key economic driver for China over the next few years," says Martin Lau, director of greater China equities at First State Investments in Hong Kong. Mr. Lau's company manages a shareholding in Tong Ren Tang. First State is part of the international investment arm of the Commonwealth Bank of Australia.
同仁堂：医药领域的潜力股
如果你想在医疗领域颇有创意地进行一次长期投资，不妨在投资组合中加入一只中药股。
尽管几十年来一直有跨国医药公司涌入中国并对传统的中医构成了冲击，但中医仍然是中国人生活中至关重要的一部分。在西方，中医被一些人视为替代性治疗手段，而在中国，中医则被医生广泛采用，并纳入了基本医疗保险范畴中。
在众多中药生产商中，在香港上市的北京同仁堂科技发展股份有限公司(Tong Ren Tang Technologies Co. Ltd., 简称：同仁堂科技)尤其抢眼。在清朝的几百年间，同仁堂曾经供奉皇宫御药房用药。
如今，同仁堂已成为中国家喻户晓的品牌。在这里，中药通常在专门的中药店出售，医生们从柜台后的木盒子中取出晾干的植物和动物产品，配成中药出售。在香港的一家同仁堂店内，你可以看到补肾的鹿茸片，滋补心脏的售价108万港元（合138,700美元）的85年野生人参，还有专治哮喘的冬虫夏草等等，五花八门，不一而足。
与广州药业股份有限公司(Guangzhou Pharmaceutical Co. Ltd.)和天津天士力制药股份有限公司(Tianjin Tasly Pharmaceutical Co. Ltd.)等多数制药商类似，同仁堂的规模也不大。该公司去年实现利润人民币2.31亿元（合2,920万美元），收入11亿元，分别高于2004年的2.056亿元和9.832亿元。
DBS唯高达(DBS Vickers)跟踪同仁堂的香港分析师罗伟业(Gideon Lo)表示，“长期来看居民整体药物支出将大幅增长，而同仁堂是中药领域的领军企业……如果你对市场的长期前景看好，你就要投资领头羊。”
该股近日走低，远低于17.90港元的52周高点。该股上周五收盘上涨2.6%，收于13.40港元。
部分分析师表示，市场预计该公司2006年利润将有所下降，这是导致该股走低的主要原因。据一位与几家医药公司有过接触的基金经理称，今年中药销售额普遍放缓。政府正在全国范围内调低医药价格以方便居民用药，这导致一些中药及西药制造商的利润受到明显挤压。
野村证券公司(Nomura Securities)驻香港分析师Wu Rui在今年夏天的研究报告中表示，今年可能不会是同仁堂的最好年景。但她补充说，该公司丰富的产品组合、实力雄厚的营销队伍以及经久不衰的品牌都将帮助其提振长期收益。
同仁堂正在重点推广和包装一些百年老配方的盒装和瓶装药丸，这些售价一两美元的药丸在其品牌知名度的带动下销量一直很好。
六味地黄丸就是其中销量极高的一种，该药在香港卖到60港元一瓶，2005年销售额达到3.69亿元。
人们喜欢丸药，因为这比配好后需要熬煎的药更容易服用。同仁堂药物资讯室的刘文宝说，大家都很忙，因此丸药特别受欢迎。
患上不太要紧的头疼感冒，很多人已经不再去医院看病，而是直接去药房买点药。因此非处方药市场的前景非常广阔。据伦敦市场研究公司Euromonitor International的统计，该市场2005年销售额增长了11%，达到人民币500亿元。
Nicholas Zamiska
