90% price increase of Chinese herbal medicines Taizi ginseng rose as much as 500%

Business News Agency reported on November 2 that in the face of a sudden increase in the number of agricultural products, Chinese herbal medicines as agricultural and sideline products are naturally not to be outdone.

According to the statistics of Chinese herbal medicines, the prices of 90% of Chinese herbal medicines have been rising in the second half of the year. Most of them have risen above 30%, and some have doubled. The most representative of them is Taizishen, and the half year price increase is as high as 500%.

In this regard, there are securities sources pointed out that the current price of Chinese herbal medicines can not reflect the market supply and demand.

Herbal medicine prices skyrocket

Since October, the prices of Chinese herbal medicines have risen so much, and the frequency of fluctuations has been very rare. Cordyceps sinensis rises from several thousand dollars per kilogram to several hundred thousand dollars, which is the most typical example.

Mr. Wang, a medicinal material supplier for the Chinese herbal medicine market in Quzhou, Henan Province, told the China Economic Times that the price of American ginseng rose by 50% to 60% from three months ago.

Shandong TCM price information network shows that the price of honeysuckle in less than a year, the highest time than usual rose 10-13 times, to 280 yuan / kg.

In many Chinese herbal medicine websites, the China Economic Times reporter also noticed that there were news of simultaneous collective price increases for dozens of Chinese herbal medicines, and the increase in many varieties hit a new high in 10 years.

“In the first 9 months of this year, the average price of Chinese herbal medicines purchased increased by 69.6% compared with the same period of 2009, and prices of more than 80% of Chinese herbal medicines rose sharply, such as Qingkailing injection, Qingkailing soft capsules and Banlangen granules. The price of Radix was doubled, and the price of Qianhu rose by more than 100%. The price of honeysuckle, Pinellia, Bitter Almond, Rhizoma Chuanxiong, Radix Scutellariae, Radix Ophiopogonis, Atractylodes Rhizome, Red Ginseng, and Buffalo Horn both rose sharply. "The Shenwei Pharmaceutical (02877.HK), the largest market capitalisation company on the Hong Kong Stock Exchange, said in its reply to the China Economic Times.

According to the statistics of the Chinese Medicines Information Center of the Chinese Medicine Association, the monitoring of the price of 537 kinds of Chinese herbal medicines in the market in September this year showed that 84% of the variety prices rose compared with the same period of last year.

“The business of medicinal herbs is generally a family-owned company. When the market was good in the past, herbal medicine merchants chose to sell their products the most to increase the selling price. However, the price increase was often the one that had collected less and did not cause any damage. The prices of medicinal herbs have risen on a large scale, but this year the real estate market is in a slump, and many of the original real estate funds have come to speculation. Herbal medicine Mr. Wang said.

Shenwei Pharmaceutical stated that in recent years, due to the increase in food prices, the long time and high cost of adding Chinese herbal medicines, many farmers have changed their crops, and the reduction in planting production has become the common cause for the collective price increase of most Chinese herbal medicines this year. Some drug farmers and herbal medicine dealers are reluctant to sell their products, hoarding, and tight supply in the market, which has further boosted the price of herbal medicines.

Ye Songtao, a pharmaceutical analyst at Changjiang Securities, said in a telephone interview with the China Economic Times that there are many factors that affect prices, such as weather disasters, reduced production, increased demand, and, of course, hot money speculation.

The company calmly responds

The skyrocketing price of Chinese herbal medicines has created waves in Chinese listed companies, but listed drug companies have shown a calm response.

According to the financial report of Kangyuan Pharmaceutical (600557), in the third quarter of this year, the company’s cost of Chinese herbal medicines increased by an average of 53% year-on-year, but the company’s information claimed that the raw material of Reduing Ning injection contains honeysuckle and other three kinds of herbs in the cost. Relatively low, even if the price of honeysuckle continues to rise, the impact is within the control of the company.

Kang Yu Pharmaceutical's flagship product is "hot toxic Ning", is a large demand for dumplings. It is understood that wolfberry fruit is a relatively small variety of traditional Chinese medicine, due to poor market prices for many years led to slow sales, business more bleak business, many farmers are not willing to plant this plant.

Some analysts pointed out that this phenomenon of Kangyuan Pharmaceutical is only a case and cannot represent the status of the industry as a whole.

China Resources Sanjiu (000999) announced the mid-year report shows that the company's cost control is facing a lot of pressure, some raw materials and accessories prices rose faster, the overall increase in the price of Chinese herbal medicines more than 20%, the cost rise makes OTC, traditional Chinese medicine formula particles The business gross margin declined.

In response, China Resources 341 who declined to be named told the China Economic Times that in order to squeeze out the cost space for capital speculation, companies can only resolve cost pressures through internal digestion, such as companies trying to control upstream raw materials. The price of proprietary Chinese medicines is subject to policy restrictions, and companies will not convert prices of medicinal herbs into prices for proprietary Chinese medicines.

In response to a letter from the China Economic Times, Shenwei Pharmaceutical stated that “We have adopted a variety of measures to cope with the increase in prices. First, we have increased purchases, and we have made strategic purchases to make bulk reserves. Second, we have adopted integrated suppliers and replaced them. Suppliers, to reduce the cost of materials; the third is through the signing of long-term contracts, price locks, stocking ahead of schedule, reducing the rate of increase.

A person in charge of Shenwei Pharmaceutical also told the China Economic Times that on the one hand, the company strengthened lean production, strengthened process quality management, and ensured product yield; on the other hand, it actively conducted energy conservation and consumption reduction, and continuously eliminated backward production processes and facilities. The recycling of various resources reduces costs.

Does not reflect market supply and demand

It seems to industry professionals that skyrocketing Chinese herbal medicines have a limited impact on the market.

"The most direct impact of price increases is the rising cost of Chinese medicine manufacturing companies and the decline in profits." Ye Songtao said on the phone that in the long run, the impact is limited because many companies have strategic stocks.

However, at the level of national regulation and control policies, there is no special means, because “the degree of marketization of Chinese herbal medicine industry is relatively high, unlike the bulk products of rice and cotton, which can be strictly controlled.” Ye Songtao said.

Insiders pointed out that the price of Chinese herbal medicines has risen to a relatively unreasonable price, and the high prices have led to the shrinking of market demand, so that the market's actual trading volume is not very large, the Chinese herbal medicine market is "having no price" status.

"The current rise in the price of Chinese herbal medicines can actually be seen as a return of value to value." Founder Securities Pharmaceutical analyst Liu Yaming told the China Economic Times reporter on the phone that due to the increase in the price of herbal medicines, the cost of production companies increased, and the profit growth rate was lower than the sales growth rate. The current data is that the sales growth rate of pharmaceutical companies is between 30% and 40%, while the profit growth rate is at 17%. The most obvious is Kangyuan Pharmaceutical and China Resources Sanjiu.

However, there are also beneficiary companies in stocks. Liu Yaming said that Kangmei Pharmaceutical (600518), the leader of Chinese Herbal Medicines, is responsible for the sharp increase in net profit in the first quarter and mid-term of this year. Business profits have increased significantly. The company is the leader of Guangdong Herbal Pieces, and is located in Puning City, which is characterized by trading rare medicinal materials. It has certain pricing and price increase capabilities and currently accounts for 10% of Guangdong's 3 billion yuan market share.

In Liu Yaming's view, the cost of the current situation is secondary. It is mainly caused by the entire inflationary economy. In the final analysis, it is the currency factor.

He said that there was also a wave of price hikes in Chinese herbal medicines in 2008. At that time, the impact on companies was different. “Like Yunnan Baiyao, because of the large amount of inventory, the impact is not significant. Through these, we also see the ability of companies to resist risks, product pricing strategies, terminal construction and operation and other comprehensive factors.”

“After the price increase in 2008, the performance of listed companies in Chinese medicines has been affected; after the weakening in 2009, the Chinese herbal medicine industry has seen rapid growth.” Liu Yaming said that from this point of view, the skyrocketing growth rate for companies with a Chinese herbal medicine planting base and a reserve strategy will be volatile in the short term; in the long run, it will have little impact on the listed companies as a whole.

At the policy level, the state has a control over the price of drugs and will respect the laws of the market. For Chinese herbal medicines, it will follow the market. Liu Yaming pointed out that the current prices of Chinese herbal medicines do not reflect market supply and demand.