20220325-招银国际-药明康德-603259.SH-Stronger_growth_momentum_4页_972kb

WuXi AppTec (603259 CH) Company Update Summary

Core Content

WuXi AppTec, a leading Contract Development and Manufacturing Organization (CDMO), has demonstrated strong growth momentum in 2021 and is expected to maintain this trend in 2022. The company reported revenue of RMB22,902 million in 2021, representing a 38.5% year-over-year (YoY) increase, and attributable net income of RMB5,097 million, up 72.2% YoY. The company also reported a 41.1% YoY increase in attributable Non-IFRS net income to RMB5,131 million. These results were in line with forecasts.

The gross profit margin (GPM) declined to 36.3% in 2021 from 38.0% in 2020 due to RMB appreciation, but the adjusted Non-IFRS GPM at constant exchange rate improved to 40.3% in 2021. WuXi AppTec has implemented an effective hedging program to manage foreign exchange risks, as most of its revenue is in non-RMB currencies.

Main Points

• 2021 Performance:

  • Revenue: RMB22,902 million (+38.5% YoY)
  • Net income: RMB5,097 million (+72.2% YoY)
  • Non-IFRS net income: RMB5,131 million (+41.1% YoY)
  • Earnings were in line with forecasts.

• 2022E Growth Guidance:

  • Overall revenue growth guidance: 65-70% YoY
  • WuXi Chemistry segment is expected to grow by ~100% YoY, driving most of the revenue growth.
  • The company plans to invest RMB9-10 billion in capital expenditures (Capex) in 2022E, with ~60% allocated to the chemical CDMO business.

• CDMO Pipeline:

  • Total projects: 1,666 (up from 1,314 in 2020)
  • Phase 3 projects: 49 (up from 28 in 2020)
  • Commercial stage projects: 42 (up from 28 in 2020)
  • The pipeline is a strong long-term growth driver.

• Oligo and Peptide Business:

  • Revenue grew by 145% YoY in 2021 and accounted for 9.4% of total CDMO revenue.
  • Expected to grow faster in 2022 due to the increasing demand for new modalities.

• CGT CTDMO Segment:

  • Revenue slightly dropped by 2.8% YoY in 2021 due to delays in BLA and the impact of the pandemic in the US.
  • However, it saw strong growth in China (87% YoY).
  • The company expects the US pipeline to progress smoothly in 2022 and the new Shanghai Lingang site to offer better services, boosting the CGT CTDMO segment's performance.

Key Financial Forecasts

Investment Recommendation

• Rating: BUY (Maintain)
• Target Price: RMB188.64 (+61.23% from current price of RMB117.00)
• Reasoning: Based on a 9-year DCF model with a WACC of 9.74% and a terminal growth rate of 3.0%.

Key Ratios

Shareholding and Performance

• Market Cap: RMB341,481 million
• Shareholding Structure:
  • Ge Li and concerted parties: 17.71%
  • A-shares: 62.73%
  • H-shares: 19.56%
• Share Performance:
  • 1-month: +10.8%
  • 3-months: -4.0%
  • 6-months: -26.6%
  • 12-months: -16.7% (relative to market)

Valuation Highlights

• DCF Valuation (RMB mn):
  • 2022E: 556,664
  • Terminal value (2030E): 1,021,06
• Equity Value (RMB per share): RMB188.64
• Net Debt to Total Equity Ratio: Net cash (as of FY22E)

Conclusion

WuXi AppTec is well positioned for continued growth, particularly in the chemical CDMO and oligo/peptide segments. The company is investing heavily in Capex to expand its manufacturing capacity and enhance its service offerings. The firm's strong pipeline and strategic initiatives suggest a positive outlook for 2022E, supported by a revised target price and a BUY rating.