20221028-招银国际-药明康德-603259.SH-Strong_recovery_post_COVID-19_disruption_5页_925kb

WuXi AppTec (603259 CH) Summary

Core Content

WuXi AppTec has demonstrated a strong recovery from the impacts of the COVID-19 pandemic, with its 3Q22 earnings aligning with expectations. The company reported a significant increase in revenue and net income, driven by its diversified CDMO services and robust financial position.

Key Financial Highlights

• Revenue in 3Q22: RMB10.64bn, up 78% YoY.
• Attributable Recurring Net Income: RMB2.38bn, up 143% YoY.
• Attributable Adjusted Non-IFRS Net Income: RMB2.47bn, up 82% YoY.
• Revenue Growth Guidance: Revised to 70–72% YoY for 2022E from 68–72% YoY.
• Revenue CAGR Target: Over 34% for 2021–2024E.
• Target Price: Revised to HK$142.20 (from HK$185.17), based on a 10-year DCF model.
• WACC: 10.94%
• Terminal Growth Rate: 3.0%

Segment Performance

• WuXi Chemistry:

  • Revenue growth in 3Q22: 115% YoY.
  • Chemical CDMO services revenue: 192% YoY.
  • Revenue from commercial-stage COVID-19 projects: ~RMB2.7bn (34% of total revenue).
  • Non-COVID revenue growth: 41% YoY (excluding commercial-stage projects).
  • Oligo & Peptide CDMO revenue in 9M22: RMB1.1bn, up over 4-fold.

• WuXi Testing and WuXi Biology:

  • Revenue growth in 3Q22: 28% (Testing) and 37% (Biology) YoY.
  • Both segments rebounded from the negative impacts of the pandemic.
  • The company enhanced its capabilities in drug safety assessment, medical device testing, SMO, and drug discovery services.

Global Expansion

• Delaware Facility: Construction of large-scale drug product manufacturing facilities initiated in August 2022.
• Singapore Investment: Announced investment of US$1.4bn over the next 10 years to develop full-suite R&D and manufacturing sites.
• Global Network: Expected to better meet the growing and diversified client demand.

Valuation and Financial Metrics

• DCF Valuation (2022E): RMB418,975 million.

• Terminal Value (2031E): RMB886,721 million.

• Profitability:

  • Gross Margin (2022E): 37.82%
  • Operating Margin (2022E): 24.74%
  • Adjusted Net Profit Margin (2022E): 22.69%
  • ROE (2022E): 23.6%

• Liquidity:

  • Current Ratio (2022E): 1.6
  • Receivable Turnover Days (2022E): 75.0
  • Inventory Turnover Days (2022E): 110.0
  • Payable Turnover Days (2022E): 107.8

• Valuation Ratios:

  • P/E (2022E): 23.6
  • P/B (2022E): 5.1
  • P/CFPS (2022E): 31.2

Shareholder Structure and Performance

• Shareholding Structure:

  • HK Investors: 19.7%
  • Ge Li and concerted parties: 18.4%

• Share Performance:

  • 1-month: 8.7% (Absolute) / 12.7% (Relative)
  • 3-months: -18.5% (Absolute) / -10.5% (Relative)
  • 6-months: -24.6% (Absolute) / -25.2% (Relative)

• Current Price: RMB78.50

• Target Price: RMB142.20 (up 81.1% from current price)

Investment Recommendation

• CMBIGM Rating: BUY
• Reason: The stock has potential for a return of over 15% over the next 12 months.

Additional Notes

• H Share Placement Plan: Terminated due to strong financial position and cash flows.
• Market Sentiment: Expected to improve with the termination of the H share placement plan.
• Analyst Certification: The analyst certifies that the views expressed accurately reflect their personal views and confirms no direct or indirect conflict of interest.

Disclaimer

• This report is for informational purposes only and not investment advice.
• Investors are advised to consult a professional financial advisor.
• CMBIGM is not a registered broker-dealer in the United States and the report is not intended for distribution to other persons in the U.S. except "major U.S. institutional investors".
• The information may not be suitable for all investors and is subject to change without notice.