20210401-招银国际-药明康德-603259.SH-Building_cutting-edge_expertise_to_secure_longterm_growth_6页

WuXi AppTec (603259 CH) Company Update Summary

Core Content and Key Highlights

WuXi AppTec, a leading company in the pharmaceutical services sector, reported strong financial performance in 2020, with revenue of RMB16.54bn (+29% YoY) and adjusted non-IFRS net profit of RMB3.56bn (+48% YoY), aligning with expectations. The company demonstrated robust growth in its China-based lab services and CDMO services, which grew by 32% and 41% YoY respectively, contributing 52% and 32% to total revenue. However, US-based lab services and clinical research CRO/SMO services were impacted by the pandemic, with US-based lab services declining 3% YoY and clinical services growth slowing to 10% YoY. These segments also experienced margin contractions of 8.7ppts and 9.7ppts respectively due to the pandemic.

WuXi AppTec expanded its customer base, adding over 1,300 new customers, with total active customers reaching 4,200, including all top 20 global pharmaceutical companies. The company plans to increase its employee count from 26,411 in 2020 to 33,600 by 2021E, reflecting strong demand and growth ambitions.

Key Growth Strategies

WuXi AppTec is focusing on building cutting-edge expertise to secure long-term growth. It is investing in emerging technologies and capabilities such as PROTAC, oligonucleotides, peptides, ADCs, bi-specific antibodies, and cell and gene therapies. The company is forming a joint venture with WuXi STA and WuXi Biologics to offer end-to-end CDMO services for ADCs and other drug conjugates, enhancing its integrated platform capabilities.

In 2020, WuXi AppTec launched a cell therapy product CTDMO platform and an AAV adherent and suspension manufacturing platform in China, further diversifying its service offerings. The company is also exploring AI, medical big data, and laboratory automation to strengthen its technological edge and market position.

Financial Performance and Projections

Earnings Summary (YE 31 Dec)

Year	Revenue (RMB mn)	YoY Growth (%)	Net Income (RMB mn)	YoY Growth (%)	Adj Non-IFRS Net Income (RMB mn)	YoY Growth (%)	EPS (RMB)	Change (%)
FY19A	12,872	34%	1,855	-18.0%	2,407	38.2%	0.81	-49%
FY20A	16,535	28%	2,960	59.6%	3,565	48.1%	1.27	56%
FY21E	21,742	31%	4,503	52.1%	4,561	27.9%	1.84	45%
FY22E	28,285	30%	5,979	34.6%	6,138	34.6%	2.44	33%
FY23E	36,814	30%	7,964	33.5%	8,193	33.5%	3.25	33%

Earnings Revisions

Metric	New (RMB mn)	Old (RMB mn)	Diff (%)
Revenue	21,742	21,722	0.09%
Gross Profit	8,451	8,500	-0.57%
Operating Profit	4,319	4,304	0.34%
Net Profit	4,503	4,124	9.19%
EPS (RMB)	1.84	1.69	8.82%
Gross Margin	38.87%	39.13%	-0.26 ppt
Operating Margin	19.86%	19.81%	+0.05 ppt
Net Margin	20.71%	18.99%	+1.73 ppt

CMBIS vs Consensus

Metric	CMBIS (RMB mn)	Consensus (RMB mn)	Diff (%)
Revenue	21,742	21,732	0.04%
Gross Profit	8,451	8,543	-1.08%
Operating Profit	4,319	4,631	-6.75%
Net Profit	4,503	3,833	17.49%
EPS (RMB)	1.84	1.58	16.34%
Gross Margin	38.87%	39.31%	-0.44 ppt
Operating Margin	19.86%	21.31%	-1.45 ppt
Net Margin	20.71%	17.64%	+3.08 ppt

Investment Outlook

CMBIS maintains a BUY rating for WuXi AppTec, raising the target price to RMB218.88, representing a 56.12% increase from the previous target. The company's diversified investment portfolio is expected to yield significant investment gains over the long term. WuXi AppTec is positioned to continue capturing market share in the global pharmaceutical industry, driven by its strong growth in core services and strategic expansion into new therapeutic areas.

Market and Financial Ratios

• Market Cap: RMB339,977 million
• Average 3-month Turnover: RMB2,931.44 million
• 52-week High/Low: RMB188.3 / RMB62.6
• Total Issued Shares: 2,135 million
• Shareholding Structure:
  • Management: 26.63%
  • A-share public shareholders: 60.47%
  • H-share public shareholders: 12.90%

Key Ratios

Ratio	FY19A	FY20A	FY21E	FY22E	FY23E
Gross Margin	39%	38%	39%	40%	40%
EBITDA Margin	25%	29%	31%	31%	31%
Pre-tax Margin	18%	20%	24%	25%	26%
Net Margin	14%	18%	21%	21%	22%
ROE	11%	9%	13%	15%	18%
ROA	7%	6%	9%	11%	13%
Net Debt to Total Equity Ratio	0.68%	Net Cash	Net Cash	Net Cash	Net Cash
BVPS (RMB)	7.63	14.06	14.66	16.39	18.69

DCF Valuation and Sensitivity Analysis

• DCF Valuation: RMB536,238 million
• Terminal Value: RMB932,322 million
• Terminal Growth Rate: 4.00%
• WACC: 9.34%
• DCF per Share: RMB218.88

Sensitivity Analysis (Terminal Growth Rate)

Terminal Growth Rate	DCF per Share (RMB)
3.00%	270.25
3.50%	299.27
4.00%	336.07
4.50%	384.28
5.00%	450.16

Sensitivity Analysis (Equity Beta)

Equity Beta	DCF per Share (RMB)
0.60	140.04
0.70	222.93
0.80	270.25
0.90	336.07
1.00	450.16

Conclusion

WuXi AppTec is well-positioned for continued growth, with a strong focus on building cutting-edge capabilities and expanding its service offerings. The company's performance in 2020 was in line with expectations, and it is expected to maintain robust growth in the coming years. CMBIS recommends maintaining a BUY rating, with a target price of RMB218.88, reflecting confidence in the company's long-term prospects and financial performance.