China TCM Monthly Tracker "Raw material prices down 14% YoY in 4M26, dow..."

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China TCM Monthly Tracker "Raw material prices down 14% YoY in 4M26, dow..."

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China TCM Monthly Tracker Equities

ChinaRaw material prices down 14% YoY in 4M26,

down 1% MoM in April Healthcare

Henry Liu, CFA

Analyst

henry-za.liu@ubs.com

TCM raw material prices down 14% YoY in 4M26 +86-105-832 8509

We think the risk of cost inflation for finished traditional Chinese medicine (TCM) drugs Chen Chen, PhD

is primarily driven by raw material prices, which comprise around 70% of TCM Analyst

companies' total COGS. Following the downward price trend in H224 (the first half-year S1460520100001

decline since 2020), the TCM Raw Materials Price Composite 200 Index was down 14% chen-zb.chen@ubs.com

YoY in 4M26 and 1% MoM in April. As inventories are high and production capacity is +86-10-5832 8201

relatively sufficient, we expect a persistent downtrend in TCM raw material prices, Judy Xie

potentially benefitting TCM companies' gross margins. Factors that can affect raw Associate

material prices include changes in supply-demand dynamics, weather events in places of S1460125100001

origin that may impact supply, and changing labour costs. judy.xie@ubs.com

+86-105-832 8006

UBS Evidence Lab data indicates robust imported donkey hide supply Anita Wei

With most e-jiao's (donkey-hide gelatin) raw material (donkey hide) being imported, we Analyst

use UBS Evidence Lab's China Healthcare Equipment and Materials Import & Export anita.wei@ubs.com

+852-2971 7459Monitor (> Access Dataset) to track imported donkey hide supply (using whole equine

hide and skin imports as a proxy for donkey hide imports) as we believe this has

implications for raw material cost trends in the e-jiao sector. Our findings indicate