According to a research report released by Zheshang Securities Co.,Ltd., the external environment and internal growth drivers across medical device sub-sectors are expected to diverge in the second half of 2026, with multiple factors at play. The brokerage recommends focusing on three key areas: companies with fully adjusted valuations and emerging earnings inflection points; medical equipment firms benefiting from the recovery of hospital tenders and sustained overseas expansion; and medical consumables players pursuing cross-sector innovation with steady product rollouts.
Looking back at sector performance since 2020, medical device valuations saw some recovery in the first half of 2026, supported by the ongoing rebound in tender activity, earnings turning points at select companies, robust overseas demand, and continuous policy-driven innovation catalysts. However, valuations across the sector remain near historical lows. Since the start of 2026, low-value consumables have led gains among all sub-sectors, likely supported by glove price increases, and have outperformed both the CSI 300 and the Shanghai/Shenzhen pharmaceutical index (Shenwan classification). Other sub-sectors are still in a bottoming phase, with share prices building momentum for a potential rebound.
Fundamentals show that revenue across all sub-sectors has returned to growth, though profit performance varies. Low-value consumables have delivered particularly strong results. Specifically, the low-value consumables, home medical equipment, and medical device sub-sectors posted double-digit year-on-year revenue growth in the first half of 2026. Low-value consumables grew 20.1% year-on-year, driven by oil price pass-through effects. Gross margins for low-value consumables improved markedly by 7.2 percentage points, likely due to significant glove pricing improvements, while other sub-sectors saw minimal fluctuation. Selling, general, and administrative expenses declined across most sub-sectors, reflecting improved cost control, with the exception of home medical equipment, where sales expense ratios rose notably due to new product launches and promotional efforts.
Net margins for the IVD and low-value consumables sub-sectors improved significantly in 1H26 compared to 1H25, partly due to a low base effect. Other sub-sectors were more affected by foreign exchange gains and losses. In terms of operational efficiency, receivable turnover ratios improved for home medical equipment, IVD, and low-value consumables. With inventory turnover and asset turnover remaining stable, return on equity increased for both the IVD and low-value consumables sub-sectors.
On recent margin trends, A-share cross-sector innovation companies have seen notable share price gains since 2026, while H-share listings have generally underperformed. Key risks include potential shortfalls in product development and commercialization, intensifying industry competition, and policy uncertainty.