20211110-招银国际-药明生物-02269.HK-Non-COVID_projects_to_see_growth_acceleration_beyond_2022E_5页_1011kb

WuXi Biologics (2269 HK) Summary

Core Content

WuXi Biologics (2269 HK) is a leading player in the China Contract Research Organization (CXO) sector, with a strong focus on non-COVID projects that are expected to drive significant growth in the coming years. The company has demonstrated robust financial performance and strategic progress, particularly in expanding its CMO (Contract Manufacturing Organization) project pipeline and securing its first mRNA service contract.

Main Points

• Growth Outlook for Non-COVID Projects: WuXi Bio is projected to see substantial growth acceleration in non-COVID revenue beyond 2022E, with expected YoY growth rates of over 50% in 2021E and above 75% in 2022E. This is attributed to the expansion of its CMO projects.

• CMO Project Expansion: The company is currently conducting 6 commercial stage projects, with 5 added during the first 9 months of 2021. WuXi Bio recorded RMB889mn in CMO revenue in 1H21, which accounted for 20% of total revenue. It is expected to add one new CMO project in 4Q21E and 2-4 projects annually from 2022E to 2023E, with 4-6 projects added annually from 2024E to 2025E.

• Milestone in mRNA Technology: WuXi Bio has signed its first mRNA service contract with a domestic client, marking a significant step in its mRNA technology platform development. The company is expected to win more mRNA projects in the future.

• Valuation and Investment Recommendation: The current share price is considered a good entry point due to its attractive relative valuation compared to foreign CXO peers. The report maintains a "BUY" rating, with a target price of HK$159.19, which is 55.16% above the current price of HK$102.6.

• Financial Performance: WuXi Bio's revenue is forecasted to grow by 79% in FY21E, 48% in FY22E, and 41% in FY23E, with adjusted net profit expected to increase by 103%, 63%, and 53% respectively. EPS is projected to grow by 7.59%, 12.22%, and 16.62% over the same period.

• Valuation Metrics: The company's P/E ratio is expected to decline from 312.23 in FY19A to 48.85 in FY23E. The P/B ratio is also projected to decrease, reflecting a potential improvement in valuation. The company's ROE is expected to increase from 9.71% in FY19A to 22.27% in FY23E, indicating improved profitability.

• Capital Structure and Liquidity: WuXi Bio maintains a net cash position, with a strong cash flow from operations. The company's balance sheet shows a steady increase in total net assets, reflecting strong growth and investment in its operations.

• Shareholding Structure: Key shareholders include Management (18.52%), JPMorgan (9.17%), The Capital Group (6.92%), and BlackRock (5.98%), with the remaining shares in free float.

• Share Performance: The company's share price has shown a 1-mth decline of -16.9%, a 3-mth decline of -24.6%, and a 6-mth increase of -8.5% in absolute terms, while the relative performance has been -16.6%, -20.3%, and +5.7% respectively.

• DCF Valuation: The report uses a 10-year DCF model with a WACC of 10.17% and a terminal growth rate of 4.00% to arrive at a target price of HK$159.19, which is based on an equity value of HK$560,590 million.

Key Information

• Target Price: HK$159.19
• Current Price: HK$102.6
• Target Price Relative to Current Price: +55.16%
• Projected Revenue Growth (YoY): 79% (FY21E), 48% (FY22E), 41% (FY23E)
• Projected Adjusted Net Profit Growth (YoY): 103% (FY21E), 63% (FY22E), 53% (FY23E)
• Projected EPS Growth (YoY): 7.59% (FY21E), 12.22% (FY22E), 16.62% (FY23E)
• Valuation Premium: The valuation premium of the China CXO sector relative to foreign CXO has reached its lowest level since the pandemic, with WuXi Bio's relative valuation at the lowest in four years.

Financial Highlights

Analyst Recommendation

• Rating: BUY
• Reasoning: The company's strong project pipeline, growth in non-COVID revenue, and attractive valuation relative to foreign peers support the "BUY" recommendation.
• Target Price: HK$159.19
• Valuation Method: 10-year DCF model with a WACC of 10.17% and a terminal growth rate of 4.00%

Risk and Disclaimer

• The report is for informational purposes only and should not be used as a basis for investment decisions without independent evaluation.
• CMBIS does not provide individually tailored investment advice and is not liable for any losses or damages resulting from reliance on the report.
• The information is based on publicly available data and is subject to change without notice.
• The report may contain conflicts of interest due to CMBIS's potential involvement in securities transactions.