Eight departments issue policy bonuses; traditional Chinese medicine concept surges accordingly. The list of the latest high-growth potential stocks is released.

On the morning of February 6, traditional Chinese medicine concept stocks collectively rose, with Teyi Pharmaceutical hitting the daily limit up, Hansen Pharmaceutical successfully hitting the limit, Zhendong Pharmaceutical up over 13%, and multiple stocks such as BioValley, Enwei Medical, Datang Pharmaceutical, and Zhizheng Tibetan Medicine following the rally. Analysts pointed out that the sector’s movement is related to a significant document issued after the market close yesterday.

Release of the Five-Year Action Plan for the Traditional Chinese Medicine Industry

On February 5, the Ministry of Industry and Information Technology and seven other departments jointly issued the “Implementation Plan for High-Quality Development of the Traditional Chinese Medicine Industry (2026–2030),” which clearly defines development goals for the next five years: by 2030, a preliminary formation of a coordinated development system across the entire TCM industry chain, a further enhancement of the stable supply capacity of key TCM raw materials, and significant improvements in digitalization and green development levels.

At the same time, by 2030, the plan aims to cultivate 60 high-standard TCM raw material production bases, establish 5 centers for the integrity and innovation of the TCM industry, and develop 10 new major Chinese patent medicines. It also promotes the transformation of TCM preparations in medical institutions into innovative TCM drugs, drafts and revises 10 industry standards related to digital and intelligent technologies in the TCM industry, releases 20 typical cases of digital transformation and upgrading, and builds 20 smart factories and cultivates 10 green factories.

The plan also includes initiatives to promote famous TCM products and cultivate outstanding enterprises by strengthening brand protection, developing flagship products of Chinese patent medicines and decoctions, promoting cross-sector integration of “Traditional Chinese Medicine +”, and developing health products; it emphasizes nurturing leading enterprises and high-quality small and medium-sized enterprises, supporting companies in expanding into international markets, participating in the revision of international standards for TCM, and enhancing the international influence of TCM brands.

Guo Wen, director of the China Pharmaceutical Industry Information Center, stated that the release of the “Plan” clarifies the direction for upgrading the TCM industry. TCM companies need to build a full-chain capability centered on clinical value to break through homogeneous competition and develop major varieties. The shift from “sales-driven” to “innovation-driven” will become an important trend and orientation for the TCM industry.

Bottoming Out and Rebound Expected in the TCM Sector

According to brokerage institutions, the TCM sector is expected to see a bottoming out and rebound opportunity by 2026.

Guojin Securities previously pointed out in its annual strategy that the TCM industry has experienced continuous destocking and performance digestion in 2024-2025, with peak shipment periods approaching, coupled with a significant rise in influenza incidence in Q4 2025, which is expected to further promote channel inventory digestion.

The firm further noted that outside hospitals, the performance of OTC Chinese patent medicines related to influenza is expected to improve, and companies with light inventory pressure may resume normal shipment rhythms, with performance likely to recover ahead of schedule; inside hospitals, the essential drug list is expected to be updated. Based on the subsequent performance of exclusive Chinese patent medicines added in the 2018 national essential drug list, companies with products that have the potential to be included in the new essential drug list are worth watching.

Century Securities’ research report pointed out that after price governance through centralized procurement, a series of policies in recent years have focused on compliance registration and inheritance and innovation, leading to a reshuffle in the TCM industry. They are optimistic about well-stocked classic formulas and integrated leading enterprises that layout evidence-based medicine.

“Since 2025, the TCM sector has faced performance pressure due to weak sales in pharmacies and hospital channels, with performance differentiation among listed companies. Overall, leading OTC companies show strong resilience,” said Wanlian Securities. Under the background of healthcare reform, the TCM industry is experiencing a painful transition in development models. In the future, diversified channels, strong branding, and high clinical value will be key. In the long term, policies will guide the industry toward high-quality and standardized development.

Many Concept Stocks Expected to Achieve High Growth This Year

The Oriental Wealth Concept Sector shows that currently, there are 145 A-share stocks related to the TCM concept, with a total market value exceeding 2 trillion yuan, led by Renguo Pharmaceutical, Pianzaihuang, and Yunnan Baiyao.

Since the beginning of the year, over 70% of concept stocks have seen their stock prices rise. Beilu Pharmaceutical led with nearly 30% increase, Guofa Shares rose about 21%, and companies like Keyuan Pharmaceutical, Teyi Pharmaceutical, Tianmu Pharmaceutical, and Fangsheng Pharmaceutical saw gains between 10% and 20%.

According to data from Oriental Wealth Choice, a total of 60 TCM concept stocks have disclosed their 2025 performance forecasts. Among them, 13 stocks including Beilu Pharmaceutical, Teyi Pharmaceutical, and Yixintang are expected to see net profit increases; Bouchang Pharmaceutical, Yiling Pharmaceutical, and Zhongsheng Pharmaceutical have successfully turned losses into profits; BioValley, Zhendong Pharmaceutical, and Yatai Group have shown performance improvements.

Looking ahead this year, many TCM concept stocks are expected to achieve significant growth in performance.

Based on consensus forecasts from three or more institutions (excluding stocks expected to report losses in 2025), Teyi Pharmaceutical’s net profit in 2026 is expected to nearly double year-on-year; Furui Medical and Baiyang Pharmaceutical are projected to see net profit increases of 55.97% and 46.58%, respectively; Xinlilong, Sunshine Nuohe, and Zhongsheng Pharmaceutical are all expected to achieve over 30% growth in performance.

(Source: Oriental Wealth Research Center)