20211103-招银国际-药明生物-02269.HK-Raised_full-year_guidance_on_strong_business_growth_momentum_4页_928kb

WuXi Biologics (2269 HK) Summary

Core Content

WuXi Biologics (2269 HK) held a 3Q21 business update meeting, reporting significant growth in its business development. As of September 2021, the company had 441 pipeline projects, including 31 in Phase 3 and 6 in commercial stage, compared to 334 / 28 / 2 as of December 2020. The backlog amounted to US$13.3bn, a 30% increase YoY and equivalent to 15 times the company's 2020 revenue. Management expects to reach cash flow breakeven in 2022E and has raised revenue growth guidance to 75% YoY for 2021E and 45% YoY for 2022E.

The company announced a global partner reward plan of up to RMB5bn in RSU, which will vest if it achieves significant market cap growth or a 5-year profit CAGR of 40% by 2025. This serves as a long-term growth indicator.

Key Business Highlights

• CMO Business Growth: WuXi Bio has 6 commercial stage CMO projects, with 5 added in the first nine months of 2021. Key projects include Vir/GSK's neutralizing mAb, AstraZeneca's COVID-19 vaccine, and GSK's Jemperli (PD-1 mAb). Three of the five newly added projects were internally incubated, highlighting the success of the "Follow-the-Molecule" strategy.
• CMO Revenue: In 1H21, the company recorded RMB889mn in CMO revenue, accounting for 20% of total revenue. Management expects to add one more CMO project in 4Q21E and additional projects in 2022E/23E and 2024E/25E.
• COVID-19 Revenue: WuXi Bio has signed contracts worth over US$1bn for vaccines in 9M21 and is negotiating an mRNA vaccine deal. These projects are expected to contribute approximately 30% of total revenue or c. RMB3bn in 2021E and at least RMB2bn in 2022E. The possible decline in post-2022 revenue is expected to have limited impact due to the company's larger revenue size.

Financial Forecast and Valuation

• Revenue Growth: Forecasts show revenue increasing by 79% / 48% / 41% YoY in FY21E/22E/23E, respectively.
• Net Profit Growth: Adjusted net profit is expected to grow by 103% / 63% / 53% YoY in FY21E/22E/23E.
• Earnings Per Share (EPS): Forecasted EPS for FY21E/22E/23E is RMB0.80 / RMB1.18 / RMB1.74, with a 4.09% / 8.57% / 17.61% increase compared to previous estimates.
• Valuation: The DCF-based target price is HK$159.19, up from the previous target of HK$155.19. The company's equity value is estimated at HK$560,590 million, with a P/E ratio of 53.32x and a P/B ratio of 10.67x.

Analyst Recommendation

• Maintain BUY: The company is expected to deliver strong returns, with a target price that reflects its growing CMO business and solid backlogs.
• Key Ratios: WuXi Bio's gross margin is expected to remain stable, while operating and net margins are projected to increase. ROE is expected to rise from 10% to 22% by FY23E.

Share Performance

• Market Cap: HK$475,193 million
• Average 3-month total return: 1,812.05 million
• 52-week High/Low: HK$148.0 / HK$70.13
• Total Issued Shares: 4,243 million

Shareholding Structure

• Management: 18.52%
• JPMorgan: 9.17%
• The Capital Group: 6.92%
• BlackRock: 5.98%
• Free float: 59.41%

Risk-Adjusted DCF Valuation

• Terminal Growth Rate: 4.00%
• WACC: 10.17%
• Terminal Value: 1,210,627 million
• Equity Value: 560,590 million
• DCF per Share (HK$): 159.19

Financial Statements Summary

• Revenue (RMB mn): FY19A: 3,984; FY20A: 5,612; FY21E: 10,025; FY22E: 14,795; FY23E: 20,826
• Net Profit (RMB mn): FY19A: 1,014; FY20A: 1,689; FY21E: 3,378; FY22E: 5,009; FY23E: 7,397
• Net Margin (%): FY19A: 25; FY20A: 30; FY21E: 35; FY22E: 35; FY23E: 36
• ROE (%): FY19A: 10; FY20A: 10; FY21E: 15; FY22E: 19; FY23E: 22

Key Ratios

• Gross Margin (%): FY19A: 42; FY20A: 45; FY21E: 48; FY22E: 48; FY23E: 49
• EBITDA Margin (%): FY19A: 33; FY20A: 40; FY21E: 46; FY22E: 46; FY23E: 46
• Pre-tax Margin (%): FY19A: 28; FY20A: 35; FY21E: 38; FY22E: 38; FY23E: 39
• Current Ratio (x): 3; 3; 2; 2; 2
• Trade Receivables Turnover Days: 128; 162; 162; 162; 162
• Trade Payables Turnover Days: 201; 271; 271; 271; 271
• BVPS (RMB): FY19A: 3.47; FY20A: 5.29; FY21E: 5.75; FY22E: 6.95; FY23E: 8.71

Analyst Certification and Disclosures

• The research analyst certifies that the views expressed reflect personal opinions and not influenced by compensation.
• The analyst confirms no trading in the stock within 30 days prior to the report and no trading within 3 business days after.
• The report is not an offer to buy or sell securities and is not liable for any losses incurred from reliance on its information.
• The report is based on publicly available information and may be subject to change without notice.
• CMBIS may have conflicts of interest and is not responsible for the report's objectivity.

CMBIS 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 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