\u3000\u3 Shengda Resources Co.Ltd(000603) 259 Wuxi Apptec Co.Ltd(603259) )
Events
On May 16, Wuxi Apptec Co.Ltd(603259) issued an announcement. The board of directors of the company deliberated and approved the proposal on the company’s additional issuance of H shares, which plans to issue no more than 78.43 million H shares, and 70% of the net fund-raising will be used for overseas business. The additional issuance of Hong Kong shares still needs the approval of the CSRC, and 22q3 is expected to land.
Brief comment
Additional issuance of Hong Kong shares to expand overseas business. 70% of the net fund-raising after deducting the issuance expenses will be used for overseas business (35% for overseas business in North America, 35% for overseas business in Asia and other regions), and 15% will be used to repay bank loans and other borrowings; The remaining amount will be used to supplement general working capital. This additional issuance of H shares will further consolidate the company’s industry leading position in the field of pharmaceutical R & D services, and continuously improve the company’s capital strength, so as to grasp market opportunities.
Wuxichemistry is growing strongly, adding new impetus to its global layout. We expect that the funds raised in this additional offering will be mainly used for Wuxi chemistry related businesses in the United States and Singapore. The cdmo business of Hequan pharmaceutical has maintained an upward trend since it was listed in 2018, with a year-on-year increase of 28% / 39% / 41% / 50% from 2018 to 2021. It has abundant pipelines, large reserves of early projects (global pipelines account for about 15%), great growth potential and strong certainty.
Accelerate the growth of new business and be optimistic about the long-term growth of the company. The company has abundant orders and continuous capacity expansion. It is estimated that the capital expenditure in 2022 will be 9-10 billion yuan, mainly for the capacity expansion of wuxichem and other business units. The largest plan in the United States is the DP project in Middleton, Delaware (expected to be put into operation in 2024). In the past few years, the company’s preparation projects have maintained rapid growth. The investment and construction of Middleton DP project will further consolidate wuxichem’s comprehensive service capacity of the whole industrial chain.
Profit forecast and investment suggestions
We expect the net profit attributable to the parent company from 2022 to 2024 to be RMB 79.69/93.14/11.787 billion, corresponding to 37 / 31 / 25 times of PE respectively, maintaining the “buy” rating.
Risk tips
Covid-19 epidemic aggravation risk, order execution less than expected risk, overseas supervision risk, ban lifting risk, core technical personnel loss risk, IP protection risk, investment risk, exchange rate fluctuation risk, raw material price rise risk, safety production and environmental protection risk.
