\u3000\u3000 Wuxi Apptec Co.Ltd(603259) (603259)
On February 15, the company announced its 2021 annual performance express. The annual revenue, net profit attributable to the parent company and net profit attributable to the parent company after deduction were higher than the previous forecast range, and the main business segments maintained strong growth. The company again raised its revenue guidance for 2022 to more than 60%. We believe that the recent large fluctuation of stock price affected by sentiment is a good time to buy. We reaffirm the “buy” rating of Wuxi Apptec Co.Ltd(603259) A shares / Hong Kong stocks and adjust the target price to 198 yuan / 224 Hong Kong dollars.
In 2021, the growth rate of revenue and net profit exceeded the forecast range. It is expected that wuxichemistry will continue to accelerate in 2022: in 2021, the company’s revenue and net profit attributable to the parent company increased by 38.5% and 72.2% year-on-year respectively, exceeding the 38-38.5% and 68-70% expected in the previous performance forecast. By sector:
1) wuxichemistry: the revenue increased by 47% year-on-year to 14.09 billion yuan, of which the revenue of small molecule drug discovery business increased by 43% year-on-year, and the process R & D and production increased by 50% year-on-year. The company expects that this sector will remain the most important growth engine in 2022, and the revenue growth rate is expected to double (i.e. 94%), mainly due to: 1) covid-19 drug project will contribute considerable revenue; 2) Crdmo mode continues to guide projects in the late clinical stage and commercialization stage.
2) wuxitesting: the revenue increased by 38% year-on-year to RMB 4.53 billion, of which the revenue of laboratory analysis and testing services increased by 39% year-on-year, and the revenue of clinical cro & SMO increased by 36% year-on-year. The company expects that the revenue growth of the sector will remain stable in 2022.
3) wuxibiology: the revenue increased by 30% year-on-year to RMB 1.99 billion. The company expects the revenue growth of the sector to remain stable in 2022.
4) wuxiatu: the revenue decreased by 3% year-on-year to RMB 1.03 billion, mainly due to the deferred listing application of some customers in the United States; Revenue in China increased by 87% year-on-year. The company expects that the revenue growth of the sector will exceed the industry average in 2022.
5) ddsu: revenue increased by 17% to RMB 1.25 billion. As the sector needs to be updated iteratively to adapt to changes in China’s new drug development strategy and environment, the company expects the revenue of the sector to decline in 2022, but we are still optimistic about the long-term potential of ddsu profit sharing model.
Recent stock price fluctuations bring buying opportunities: we predict that the adjusted non IFRS net profit of 2022-24e is RMB 79.3/104.1/13.31 billion, corresponding to 36.8% of 2021-24ecagr, which is mainly driven by small molecule crdmo business. Considering the increasing uncertainty of the industry’s long-term prosperity under the change of China’s innovative drug financing environment and the decline of the overall valuation center of the industry, we lowered the company’s A-share and Hong Kong stock targets 2022epe to 74x / 70X, which is consistent with the historical average, corresponding to the target price of 198 yuan / 224 Hong Kong dollars. Since the beginning of the year, the share prices of A-Shares and Hong Kong shares of the company have fallen by 21% / 25%. We believe that it is mainly due to sentiment, and the fundamentals of the company continue to improve. At present, it is an excellent opportunity to maintain the “buy” rating of A-Shares and Hong Kong shares.
Investment risk: fluctuation of investment income; Geopolitical risks; The project failed or was delayed due to the epidemic.
