20210125-招银国际-药明康德-603259.SH-Strong_growth_outlook_in_2021_and_beyond_5页_860kb

WuXi AppTec (603259 CH) Summary

Core Content

WuXi AppTec is a leading player in the China healthcare sector, with a strong growth outlook for 2021 and beyond. The company's performance has been significantly impacted by the global pandemic, particularly in its US-based laboratory services and clinical CRO services. However, its China-based laboratory services and CDMO (Contract Development and Manufacturing Organization) services have continued to grow robustly.

Key Financial Highlights

• Revenue Growth: WuXi AppTec's revenue is projected to grow by 33% YoY in 2H20E, accelerating from 23% YoY in 1H20. The long-term revenue forecast shows a steady growth, with an expected increase from RMB16,528mn in FY20E to RMB28,248mn in FY22E.
• Net Income: The company's net income is expected to grow from RMB2,888mn in FY20E to RMB5,475mn in FY22E, reflecting a YoY growth of 47%, 33%, and 35% respectively.
• EPS Growth: Earnings per share (EPS) are forecasted to rise from RMB1.18 in FY20E to RMB2.24 in FY22E, with a YoY growth of 43%, 33%, and 33% respectively.
• Valuation Metrics: The company's P/E ratio is expected to decrease from 148.81 in FY20E to 78.49 in FY22E, while the P/B ratio is projected to decline from 13.23 to 10.94. The ROE is expected to increase from 8.96% in FY20E to 14.05% in FY22E.

Growth Drivers

• CDMO Expansion: WuXi AppTec has significantly expanded its CDMO pipeline, adding 575 new molecules in 2020 and reaching over 1,200 active projects. The company has 28 commercial projects and a growing backlog in cell and gene therapy CTDMO, with 2-3 projects expected to file BLA in 2021.
• Success-Based Projects: In 2020, the company enabled 33 IND filings and 30 CTAs. As of end-2020, it had 193 ongoing success-based projects, including 2 in Phase III, 9 in Phase II, and 60 in Phase I.
• COVID-19 Drug Discovery: WuXi AppTec developed a small molecule drug discovery platform early on, which supported over 60 global customers and became a new growth driver for its China-based lab services.
• Clinical CRO Recovery: Despite the pandemic impact, the company registered 45% YoY growth in its SMO backlog in 9M20 and 100% YoY growth in its CDS backlog, indicating a strong recovery in clinical CRO services for 2021E.

Target Price and Investment Outlook

• Target Price (TP): The DCF-based target price was lifted from RMB139.05 to RMB218.73, reflecting the strong growth outlook, which is an increase of +24.28%.
• Investment Portfolio: The company's diversified investment portfolio is expected to generate significant investment gains over the long term.

Share Performance and Market Position

• Market Capitalization: The market cap is RMB428,018mn, with an average 3-month turnover of RMB1,741.50mn.
• Shareholding Structure: Management holds 26.63%, A-share public shareholders hold 60.47%, and H-share public shareholders hold 12.90%.
• Share Performance: The company's share price has shown strong performance, with a 1-month return of 29.6%, 3-month return of 47.7%, and 6-month return of 46.1%.
• Analyst Ratings: The company is rated as a BUY with a target price of RMB218.73, indicating a potential return of over 15% over the next 12 months.

Financial Statements and Ratios

• Balance Sheet: The company has a growing total net asset base, reaching RMB39,276mn in FY22E. Its current ratio has improved from 3 in FY18A to 4 in FY21E.
• Profit & Loss Ratios: The company's gross margin is expected to remain stable, with a slight increase in operating and net margins over the forecast period.
• Key Ratios: WuXi AppTec maintains a solid financial position, with a high current ratio and a growing ROE and ROA.

Risk and Disclaimer

• The report contains forward-looking statements and is based on analyses and interpretations of publicly available information.
• There are risks involved in trading any securities, and the information may not be suitable for all investors.
• CMBIS does not provide individually tailored investment advice and recommends that investors consult with a professional financial advisor.

Related Reports

• Accelerated growth in 3Q20: Driven by strong performance in CDMO and China-based lab services.
• Enhance leading position amid pandemic: Highlighting the company's resilience and growth during the pandemic.
• Strong core business growth: Demonstrating consistent growth in core operations.
• Strengthening leading position in global CRO/CDMO industry: Showing the company's increasing market share and influence in the industry.

Analyst Certification

• The research analyst certifies that the views expressed in the report accurately reflect their personal views and that no part of their compensation is related to the specific views expressed in the report.
• The analyst confirms that they have not traded in the stock covered in the report within 30 calendar days prior to the report's issue date and will not do so within 3 business days after the issue date.

CMBIS Ratings

• BUY: Stock with potential return of over 15% over the next 12 months.
• HOLD: Stock with potential return of +15% to -10% over the next 12 months.
• SELL: Stock with potential loss of over 10% over the next 12 months.
• NOT RATED: Stock not rated by CMBIS.
• OUTPERFORM: Industry expected to outperform the relevant broad market benchmark.
• MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark.
• UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark.

Important Disclosures

• The report is for informational purposes only and not an offer to buy or sell any security.
• CMBIS is not a registered broker-dealer in the United States and is not subject to U.S. rules regarding research reports.
• The report is distributed in Singapore by CMBI (Singapore) Pte. Limited, an Exempt Financial Adviser regulated by the Monetary Authority of Singapore.
• The report is intended for distribution solely to "major US institutional investors" and may not be furnished to any other person in the United States.