20230426-招银国际-药明康德-603259.SH-Healthy_growth_amid_challenging_environment_5页_927kb

WuXi AppTec (603259 CH) Report Summary

Financial Performance and Key Metrics

• 1Q23 revenue grew by 6% YoY to RMB8,964mn, with attributable adjusted non-IFRS net income up 14% YoY to RMB2,342mn. Non-IFRS gross profit margin improved to 41.0%, and net profit margin to 26.1%. Full-year 2023E estimates indicate 5.8% revenue growth and 9.3% adjusted non-IFRS net income growth, based on a DCF model with a target price of RMB110.69.
• Revenue segments: D&M (WuXi Chemistry) grew 30% YoY, new modalities services increased 44% YoY to RMB540mn (9.6% of segment revenue). Margins improved due to operational efficiency.
• Non-COVID business resilient, biotech client revenue surged 53% YoY.Pipeline progress: WuXi ATU has 8 Ph3 projects, with BLA reviews advancing; WuXi DDSU saw royalty income from a COVID drug approval.

Analyst View and Recommendations

• Analyst maintains "BUY" rating, citing strong client mix and operational efficiency. Reiterated 2023E growth targets: 5-7% revenue and 12-14% non-IFRS gross profit growth. Target price reduced to RMB110.69 from RMB121.52 due to healthcare funding uncertainties.
• Projections: Revenue grows 28.8% in 2024E and 25.8% in 2025E; adjusted non-IFRS net income up 27.4% and 24.4% respectively. P/E ratio ranges from 12.3x to 19.5x over the period.

Risks and Outlook

• Global healthcare funding slowed down (decreased 57% YoY in China), impacting top-tier pharma demand, but CXO leaders like WuXi AppTec are less affected due to superior client relationships and bargaining power.
• Key growth drivers include new modalities services, with WuXi Chemistry reporting 40% YoY growth in 2023E. Integration benefits and synergies among segments expected to enhance performance.
• Valuation: Current price RMB67.50, with market cap RMB200,301.1mn. P/E (adjusted) is 19.5x in 2023E, reflecting moderate upside potential.

Financial Data Highlights

• Historical growth: Revenue up 71.8% YoY in 2022A, driven by strong R&D and operations. Improved metrics in margins and profitability.
• Risk factors: Dependence on healthcare funding, demand cycles, and potential margin pressures. Current ratios and debt-to-equity indicate stable liquidity.

Key Conclusions

• Despite a challenging global environment, WuXi AppTec demonstrates healthy growth and operational efficiencies. Analysts recommend for investors seeking exposure to the CXO sector with medium-to-long-term potential, supported by new modalities and strong client base.