20210825-招银国际-药明生物-02269.HK-Earnings_beat_driven_by_strong_demand_in_COVID-19_related_projects_4页_1000kb

WuXi Biologics (2269 HK) Summary

Core Content

WuXi Biologics (2269 HK) reported strong financial performance in 1H21, with revenue and attributable net profit increasing by 127% and 150% YoY, respectively, reaching RMB4,407mn and RMB1,842mn. These figures accounted for 52% and 82% of the full-year estimates, indicating robust growth. Adjusted net profit grew by 172% YoY to RMB1,812mn, while gross profit margin and net profit margin improved by 11.6ppts and 5.1ppts to 52.1% and 42.7%, respectively.

The company has capitalized on the demand from COVID-19 related projects, including neutralizing antibodies and vaccines. WuXi Biologics successfully enabled Vir/GSK's neutralization mAb to achieve EUA approval from the US FDA in 14 months and is providing exclusive CMO service for the product. It is also the largest CMO service provider for AstraZeneca's Vaxzevria (AZD1222), with RMB889mn in CMO revenue for 1H21, representing 20% of total revenue. As of 30 Jun, the company has secured US$1.3bn in contracts for COVID-19 projects, including 3 vaccine projects and 15+ neutralizing mAbs. The earnings from these projects are expected to remain strong through 2022.

WuXi Biologics is positioned to grow into a global top-tier biological CDMO platform by leveraging its cutting-edge technology platforms and state-of-the-art manufacturing facilities. It has continuously upgraded its platforms, such as WuXiBody, WuXia, and WuXiUP, and has made progress in ADC (Antibody Drug Conjugate) through its WuXi XDC joint venture, which has accumulated 48 ADC projects. Additionally, WuXi Bio is aiming to be a first-mover in the mRNA sector by establishing an end-to-end mRNA technology platform and building a significant mRNA manufacturing facility. The company plans to expand its total manufacturing capacity from 54,000L in 2020 to 430,000L by 2024, which will support CDMO revenue growth.

Key Financial Highlights

Earnings Growth and Valuation

CMB International Securities has raised its FY21/22E net profit forecasts by 56.8% and 49.2%, respectively, to reflect rapid capacity expansion and advanced technology platforms. The analyst expects revenue growth of 72%, 43%, and 39% YoY for FY21E, FY22E, and FY23E, respectively, with adjusted net profit expected to grow by 121%, 42%, and 37% YoY.

The target price is set at HK$155.19, with a +27.52% upside from the current price of HK$121.70. This target price is derived from a DCF valuation using a WACC of 9.71% and a terminal growth rate of 4.00%. The DCF per share is calculated at HK$155.19.

Share Performance

Shareholding Structure

Key Ratios

Analyst Ratings

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

Conclusion

CMB International Securities maintains a BUY rating for WuXi Biologics, citing strong earnings performance, growth in capacity and technology, and significant contracts related to the pandemic. The company is well-positioned to benefit from CDMO demand, particularly in mRNA and ADC sectors, with continued revenue and margin improvements expected over the next few years. The DCF-based target price of HK$155.19 reflects the company's strong long-term growth prospects and high potential return.