20230802-招银国际-药明康德-603259.SH-Impressive_margin_improvement_in_1H23_6页_965kb

Summary of WuXi AppTec (603259 CH) Report

Financial Performance (H1H23)

• Revenue: RMB18,871mn, up 6.3% YoY.
• Adjusted Non-IFRS Net Income: RMB5,095mn, up 18.5% YoY.
• Non-IFRS Gross Profit Margin: 41.6%, improved by 3.4ppt.
• Non-IFRS Net Profit Margin: 27.0%, improved by 2.8ppt.
• H1H23 revenue and adjusted income accounted for 45-52% of full-year estimates and consensus.

Key Growth Drivers

• Non-COVID projects drove 25% YoY backlog increase; WuXi Chemistry segment non-COVID revenue: +51.6% YoY in Q2H23 (versus +21.8% YoY in Q1H23).
• TIDES (oligo and peptides) revenue: +37.9% YoY in H1H23, with 188% YoY backlog increase; expected >70% YoY revenue growth for TIDES in 2023E.
• Revenue from new modalities services strong, supported by balanced client base and challenging financing environment in pharma.

Management Targets and Confidence

• Reiterated 5-7% YoY revenue growth for 2023; raised non-IFRS gross profit growth target to 13-14% YoY (from 12-14% YoY).
• Margin improvement driven by favorable currency exchange rates and operational efficiency; GPM sustainability at >40% possible if no major forex changes.

Valuation and Recommendation

• Maintain BUY rating; target price revised to RMB116.73 (previous RMB110.69).
• 10-year DCF model valuation supports higher share price; expected revenue growth: 6.1% YoY in 2023E.

Performance and Outlook

• Revenue and profit margins beat expectations; positive outlook amid tough macro environment, driven by non-COVID and TIDES segments.