\u3000\u3 Shengda Resources Co.Ltd(000603) 259 Wuxi Apptec Co.Ltd(603259) )
Key investment points
Orders on hand: accelerate and lay the certainty of high revenue growth in 2022
According to the company’s annual report, 29.1 billion orders were placed in 2021 (YoY 83.5%). Contract liabilities were 2.986 billion yuan (up 105% year-on-year in 2020), inventories were 5.905 billion yuan (up 241% year-on-year in 2020), and personnel increased 32% year-on-year. Both the order growth trend and personnel reserve lay the foundation for high income growth in 2022.
New business: continuous realization brings new increment
We found that many new businesses of the company have entered a relatively benign development stage, which also provides certainty for the stable growth of the company’s revenue in 20222025 or even longer dimensions. 1) Cdmo of polypeptides and oligonucleotides: in 2021, the revenue will reach 150 million US dollars (YoY 145%), and the new production capacity is also continuously put into operation, which is expected to continue to grow at a high rate. 2) Preparation cdmo: by the end of 2021, there were 4 preparation commercial production projects, and another 8 preparation projects were in the stage of clinical phase III or NDA application. With the continuous volume of commercial varieties, the preparation cdmo business is also expected to enter the performance acceleration period. 3) ATU: according to the annual report, the cdmo business of cell and gene therapy has a revenue of 92 million in China and 934 million overseas. Considering that CGT projects will enter the BLA and commercialization stage in succession from 2022, we believe that ATU business is expected to enter an accelerated growth period.
R & D Investment: Reserve new technology platforms and lay out medium and long-term new business development
In 2021, 942 million yuan (YoY 35.91%) was invested in R & D, reaching a new high. Focus on the construction of platform empowerment, including enzyme catalysis, flow chemistry, etc. It also includes a series of new capacity-building R & D activities such as Tessa, protac, oligonucleotide drugs, polypeptide drugs, coupling drugs, cell and gene therapy and resource sequencing algorithm development, so as to provide technical support for the growth of new businesses and new orders from 2022 to 2025.
Acceleration cycle: optimistic about the compound acceleration of income from 2021 to 2025
We are optimistic about ① stock business: small molecule cdmo has entered the cashing period of funnel effect, and drug discovery, testing services and biological services have maintained high growth. ② Incremental business: ATU enters the performance acceleration period, and peptide and oligonucleotide cdmo and preparation cdmo enter the harvest period, bringing flexibility. ③ Opening of acceleration cycle: we believe that the company’s short, medium and long-term income has a strong growth trend, and we are optimistic that Wuxi Apptec Co.Ltd(603259) 2021-2025 will enter a new round of 5-year compound income growth acceleration cycle.
Profit forecast and valuation
We expect the company’s EPS to be 2.95, 3.45 and 4.36 yuan / share from 2022 to 2024. The closing price on March 24, 2022 corresponds to 37 times of PE in 2022 (32 times of PE in 2023), which is still relatively undervalued and maintains the “buy” rating.
Risk tips
Risk of declining prosperity of global innovative drug R & D investment; Risk of business decline due to unfavorable international expansion; Each competitive risk; Exchange risk; Uncertainty risk caused by fair value fluctuation.
