2023-08-02 11:20:06 和讯  招银国际JillWU/Benchen
  WuXi AppTec reported 1H23 revenue of RMB18,871mn, up 6.3% YoY, and attributable recurring net income of RMB4,761mn, up 23.7% YoY, with attributable adjusted non-IFRS net income of RMB5,095mn, up 18.5% YoY. 1H23 revenue / adjusted Non-IFRS net income accounted for 45-52% of both our full-year estimates and consensus estimates, which also fell in its average historical range. Non-IFRS gross profit margin (GPM) improved by 3.4ppt to 41.6% while non-IFRS net profit margin increased by 2.8ppt to 27.0% in 1H23, driven by favourable currency exchange rates and continuously improved operating efficiency. Excluding commercial COVID-19 projects, overall backlog increased by 25% YoY. Despite the high base of 2022, Management reiterated revenue growth target of 5-7% YoY while slightly raised non-IFRS gross profit growth target to 13-14% YoY (from 12-14% YoY) in 2023E, indicating management’s confidence in the Company of navigating through the tough macro environment.
  Non-COVID projects to firmly fuel sustainable growth. Supported by strong growth of D&M services, non-COVID revenue growth of WuXi Chemistry segment accelerated quarter-by-quarter in 1H23 with +51.6% YoY in 2Q23 vs +21.8% YoY in 1Q23 (both excluding commercial COVID-19 projects).Management expected COVID revenue of ~RMB3.0bn in 2023E with ~RMB1.5bn already recognized in 1H23. We think the strong growth of non- COVID revenue reflected the robust demand from the Company’s extensive and balanced client base amid the temporarily challenging financing environment in global pharmaceutical industry.
  Benefiting from strong demand growth for new modalities services.Revenue from TIDES (mainly oligo and peptides) in WuXi Chemistry segment grew by 37.9% YoY in 1H23, on top of a 337% YoY growth in 2022. Backlog of TIDES dramatically increased by 188% YoY in 1H23, while Management expected over 70% YoY growth of TIDES revenue in 2023E. We expect meaningful future revenue from the CMO services for a blockbuster dual-targeted GLP-1 product. We are positive on the Company’s competency in the global peptide market to capture the increasing weight-loss market opportunity, based on its established capacities (over 10,000 liter peptide solid-phase synthesizers as of Feb 2023) and R&D capabilities (1,000 staff as of Feb 2023).
  Margin improvement driven by favourable currency exchange rates and operating efficiency improvement. Management indicated that the GPM improvement of 3.4ppt in 1H23 was mainly attributed to favourable currency exchange rate (2.4ppt) and increasing operation efficiency (1.0ppt). If no major change in foreign exchange in 2H23E, GPM could be maintained at above 40% for 2023E, according to Management. The Company is also optimizing employee output by implementing big data and automation in services.
  Maintain BUY. We revised our TP from RMB110.69 to RMB 116.73, based on a 10-year DCF model with WACC of 11.57% and terminal growth of 3.0%. We forecast WuXi AppTec’s revenue to grow by 6.1%/ 28.8%/ 25.8% YoY and adjusted non-IFRS net income to grow by 12.5%/ 24.8%/ 23.2% YoY in 2023E/ 24E/ 25E, respectively.
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