20220819-招银国际-药明生物-02269.HK-Non-COVID_projects_driving_long-term_growth_6页_1mb

WuXi Biologics (2269 HK) Summary

Core Content

WuXi Biologics (2269 HK) reported strong financial results for the first half of 2022 (1H22), highlighting significant growth in both revenue and net income, driven primarily by non-COVID projects. The company is actively expanding its global capabilities and increasing its long-term production capacity to support continued growth and reduce geopolitical risks.

Main Points

• Financial Performance in 1H22:

  • Revenue: RMB7,206 million, up 64% YoY.
  • Attributable Net Income: RMB2,535 million, up 38% YoY.
  • Attributable Non-IFRS Net Income: RMB2,835 million, up 60% YoY.
  • Non-COVID revenue grew by 73% YoY, while COVID revenue increased by 46% YoY.
  • 1H22 revenue accounted for 48% of full-year forecasts.
  • Gross profit margin was 47.4%, down from 52.2% in 1H21 due to a high base effect.
  • Total backlogs reached US$18.5 billion as of June 2022, up 36% from end-2021.
  • Management raised full-year revenue and adjusted net profit growth guidance from 45%+ to 47%+ YoY.

• Non-COVID Growth:

  • Non-COVID revenue is expected to grow by 67% in 2022E and 65% in 2023E.
  • The company has 534 integrated projects as of June 2022, with 29 in phase 3 and 14 in commercial stage.
  • 8 out of 14 commercial projects are non-COVID-related.
  • WuXi Bio added 59 projects in 1H22, of which 56 were non-COVID.

• Geopolitical Risk Mitigation:

  • The impact of US-China restrictions (UVL) is largely removed.
  • US BIS completed on-site inspections for WuXi City facilities in June.
  • Two US suppliers have obtained approvals to export restricted products (bioreactors) to WuXi Bio starting from early August.
  • The schedule for Shanghai facilities' inspection is pending due to the ongoing impact of the pandemic, but operations remain unaffected.

• Capacity Expansion:

  • WuXi Bio raised its long-term capacity target from ~430,000 liters by 2024 to ~588,000 liters by 2026.
  • The company announced a US$1.4 billion investment over the next 10 years to build full-suite CRDMO facilities in Singapore.
  • Singapore facilities will begin operations by 2026, adding 120,000 liters of capacity.
  • This will enhance the company's global network, which includes China, Ireland, Germany, and the US.

• Valuation and Investment Outlook:

  • The target price was revised from HK$146.12 to HK$120.39, based on a 9-year DCF model.
  • The price-to-earnings (P/E) ratio is expected to decrease from 109.6 in FY20A to 33.8 in FY24E.
  • The price-to-book (P/B) ratio is projected to decline from 11.9 to 5.2 over the same period.
  • The analyst maintains a BUY rating, citing the company's strong backlog and growth potential.

Key Financial Metrics

Analyst Ratings

• Rating: BUY
• Target Price (HK$): 120.39
• Previous Target Price (HK$): 146.12
• Up/Downside: 67.9%
• Current Price (HK$): 71.70

Shareholding and Stock Data

Shareholding Structure

Share Performance

Valuation (DCF)

Analyst Certification and Disclosures

• The research analyst certifies that all views expressed accurately reflect personal opinions.
• The analyst and associates did not trade in the stock covered in the report within 30 days prior to publication and will not do so within 3 days after publication.
• The report is not tailored to individual investors and is for informational purposes only.
• CMBIGM is not a registered broker-dealer in the U.S. and is not subject to U.S. rules regarding research reports and analyst independence.
• The report is for the use of intended recipients only and may not be reproduced or distributed without prior written consent.

CMBIGM Ratings

• BUY: Potential return of over 15% over next 12 months.
• HOLD: Potential return of +15% to -10% over next 12 months.
• SELL: Potential loss of over 10% over next 12 months.
• NOT RATED: Stock is not rated by CMBIGM.

Industry Outlook

• OUTPERFORM: Industry expected to outperform the relevant broad market benchmark.
• MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark.
• UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark.

Disclaimer

• The information is based on publicly available data and is not guaranteed to be accurate or complete.
• Past performance is not indicative of future results.
• CMBIGM is not liable for any loss or damage resulting from reliance on the information.
• Investors are advised to consult professional financial advisors before making investment decisions.