Research On The Application Of Modified Residual Income Model In Stock Investment Of Chinese Pharmaceutical Manufacturing Enterprises

As the world's largest emerging pharmaceutical market,China's pharmaceutical industry has experienced rapid development in recent years.In 2017,China's pharmaceutical market has become the world's second largest pharmaceutical market after the United States.Such a huge market has also bred the growth of a large number of pharmaceutical manufacturing companies in China,and has also attracted countless capital competition.In 2010-2017,the number of investment cases in China's pharmaceutical health industry achieved an average annual growth rate of 35%.Especially since 2015,investment in the pharmaceutical and health industry has increased rapidly.The number of investment cases exceeded 600 in 2015,800 in 2016 and 900 in 2017.At the same time,the number of pharmaceutical companies listed has also increased.In 2017 alone,16 pharmaceutical companies were successfully listed on the main board.As of 2017,there are more than 270 medical companies listed on the Shanghai Stock Exchange and the Shenzhen Stock Exchange.Such frequent capital activities also bring a very important question:how to accurately assessing the value of pharmaceutical companies.Correctly assessing the phannaceutical enterprise's intrinsic value,this both for pharmaceutical enterprise merger,acquisition and reorganization of pricing,and for medical enterprises IPO pricing and pharmaceutical companies in the secondary market investment transactions have important guiding significance.Enterprise value assessment has always been a research hotspot in the financial and accounting circles,various valuation theories and models of different systems keep emerging.The traditional valuation methods commonly used in the market are summarized as follows:cost method(historical cost method,replacement cost method,etc.),income method(dividual discount model,cash flow discount model,residual income model,etc.),market method(PB/PE valuation method).The theoretical basis of the valuation methods of different systems is also different,and each has its own advantages and shortcomings.Based on the previous research results,this paper analyzes the advantages and disadvantages and applicability of various valuation methods,and selects the residual income model with theoretical advantages and practical application advantages as the valuation tool.And the applicability of the residual income model in the value evaluation of Chinese pharmaceutical manufacturing enterprises is expounded.Next,the DuPont analysis system was introduced to modify the residual income model.which made the prediction results of the model more scientific and the accuracy was greatly improved.Combined with the analysis of the pharmaceutical manufacturing industry,it judges the development cycle of the pharmaceutical industry and the future development trend,so as to more accurately evaluate the pharmaceutical manufacturing enterprises.F:inally,a typical pharmaceutical manufacturing company,Fosun Pharma,was selected as a case.First of' ail,we should have a deep understanding of the enterprise,obtain the public financial data of the enterprise,and apply the modified residual income model to evaluate its value.Comparing the valuation results with the market value of Fosun Pharma,the analysis results show that the market price of Fosun Pharma generally fluctuates around the value of the enterprise assessed by the residual income model.When the market price deviates from the valuation value,it will eventually be corrected by the market,so that the market price returns to the model evaluation value.This also verifies that the residual income model valuation results corrected in this paper better reflect the true intrinsic value of pharmaceutical manufacturing enterprises.Therefore,we can use the revised residual income model to provide some guidance for our investment decision-making.On the one hand,it provides reference for the pricing of phanmaceutical manufacturing enterprises in mergers and acquisitions.On the other hand,it can provide decision-making guidance for investors when they invest in pharmaceutical enterprises in the secondary market.