Wuxi Apptec Co.Ltd(603259) ( Wuxi Apptec Co.Ltd(603259) ) the company’s annual revenue and adjusted non IFRS net profit increased by about 40%, and it is expected that the revenue will increase by 65-70% in 2022. We believe that with the release of production capacity and the acceleration of new molecule / technology layout, the follow-up performance is high, the growth certainty is high, and the current valuation is very attractive (1.0x 2022e PEG). We reaffirm the “buy” rating of the company’s A-Shares / Hong Kong shares and select it as one of the preferred targets in the industry.
The growth rate of revenue and net profit in 2022 is 65-70%. In 2021, the company’s revenue increased by 39% year-on-year to 22.9 billion yuan. The gross profit margin decreased by 1.7pcts to 36.3% year-on-year, mainly due to: 1) exchange rate fluctuations; 2) The rise in the price of bulk materials leads to the rise in the price of raw materials; 3) During the epidemic in China in 2020, social security expenses were exempted, with a high base. Adjusted non IFRS net profit increased by 41% year-on-year to 5.1 billion. 4q21 revenue and adjusted non IFRS net profit increased by 35% / 11% respectively. The company expects that the revenue growth rate in 2022 will further increase to 65-70%, of which 1q will increase by 65-68%, partially benefiting from covid-19 related orders. The annual performance is divided into business segments:
Wuxi chemistry revenue increased by 47%, drug discovery (R) and process R & D / production (D + m) revenue increased by 43.2% and 49.9% respectively, and crdmo business model continued to flow downstream; The number of pipeline molecules increased from 732 to 1666 (41 under the win molecule strategy), including 14 to 42 commercial projects (including 4 preparation projects). We expect revenue to nearly double in 2022.
Wuxi testing revenue increased by 38%, toxicology / safety assessment revenue increased by 63%, continued to maintain the leading position in the Asia Pacific, and the revenue of clinical cro and SMO increased by 36%; 149 new projects were signed on the wind platform. We expect sector revenue to grow by more than 30% in 2022.
Wuxi biology’s revenue increased by 30%, of which the revenue of DNA coding compound library increased by 42%. New molecular types including oligonucleotides, protac and tumors are important growth engines (+ 75% YoY), and their contribution to the revenue of the sector has increased from 10.4% in 2020 to 14.6%.
Wuxi ATU’s revenue fell by 3% (China + 87 yoy, accounting for 15% of the sector’s revenue), mainly due to the delay of customer product listing declaration and the impact of covid-19 epidemic. With the launch of its breakthrough Tessa technology platform and ctdmo mode diversion later projects (currently 11 are in phase III, of which 4 are about to be reported for production), we expect the revenue of the sector to resume growth in 2022.
Wuxi ddsu revenue increased by 18%. We expect the revenue to decline in 2022, mainly because Chinese customers prefer to invest in the first / best drugs of the same kind, and the project execution time will be prolonged
Maintain the “buy” rating and target price: we fine tuned the adjusted non IFRS net profit of 202224e to RMB 8.2/103.0/12.77 billion, which is + 3% / – 1% / – 4% compared with the previous forecast, corresponding to 35.5% 202124e CAGR. We maintain the target price of RMB 198 / HK $224, corresponding to 72x / 66x 2022e PE, slightly lower than the average price in the past two years.
Investment risk: fluctuation of investment income; Geopolitical risks; Project failure or delay due to epidemic situation
