\u3000\u3000 Wuxi Apptec Co.Ltd(603259) (603259)
On January 18, the company announced the performance forecast for 2021. The annual revenue increased by 38-38.5%, slightly higher than the 36-38% previously guided by the management; Net profit attributable to parent / net profit deducted from non attributable to parent increased by 68-70% year-on-year, higher than previous market expectations. The company’s demand for orders is strong, with high performance and strong growth certainty under the continuous release of production capacity in the next three years. We reiterate the “buy” rating of Wuxi Apptec Co.Ltd(603259) A shares / Hong Kong shares and maintain the target price of 210 yuan / HK $240.
4q21 revenue accelerated and core business was promoted at full speed: 4q21 company’s revenue profit increased by 33-35% (mom + 6%) respectively, higher than 31% of 3q21. 4q21 deduction of non attributable net profit increased by 24-29%. All business segments have made brilliant achievements: 1) wuxichemistry: the small molecule crdmo pipeline added 732 molecules in 2021 (206 molecules in 4q), of which 41 came from the “win molecules” strategy. By the end of 2021, the pipeline had a total of 1666 molecules, of which 49 were in phase III, 42 were commercialized and 99 were oligonucleotide and polypeptide drug projects; 2) Wuxibiology and wuxichemistry have strong synergy. In 2021, customers using both businesses contribute > 70% of the company’s revenue; 3) Wuxitesting will have 110000 square meters of laboratories by the end of 2021, which is expected to increase to 165000 square meters by 2023, and the number of animal laboratories will increase from 450 by the end of 2021 to 750 by 2023; 4) Wuxiatu (cell and gene therapy) has 72 comprehensive projects by the end of 2021, including 11 phase III projects (4 near the preparation stage of BLA); 5) Ddsu: there are 232 projects in total, including 1 project in NDA stage and 3 projects in phase III.
The release of production capacity will contribute to the continuous acceleration of performance growth in 2022: the management expects that the revenue and net profit will increase by 45% in 2022 (assuming that the epidemic has limited impact on the company’s overall operation and there will be no large-scale closure in China), and the growth rate of Wuxi chemistry will increase. By the end of 2021, the company had about 1.16 million square meters of laboratories, production and office space, which is expected to increase to about 1.7 million square meters by the end of 2023. Taixing, Changshu API production base and Changzhou base phase III are expected to be officially put into operation this year, and the API production capacity will increase by about 70% this year. The capital expenditure in 2021 was RMB 6.65 billion, slightly lower than the previously estimated 8 billion, mainly due to the delay in the actual payment of some funds to January this year; The management expects the capital expenditure to be RMB 8-10 billion in 2022. According to the company’s capacity and capital expenditure plan, we expect the capacity of small molecule crdmo to grow by more than 30% in the next three years.
Reiterate the “buy” rating and target price of A-Shares / Hong Kong shares. We raised the net profit attributable to the parent company of 2021-23e to RMB 4.98 billion / 7.13 billion / 10.11 billion, corresponding to 42.6% of 2021-23ecagr, mainly driven by small molecule crdmo and ATU businesses. Considering the uncertainty of the long-term contribution of covid-19 business and the downward adjustment of the overall valuation center of the industry, we temporarily maintain the target price of the company’s A-Shares and Hong Kong shares of RMB 210 / HK $240, corresponding to 87.1x/81.2x2022epe (about 1 standard deviation higher than the historical average) and 2.0x/1.9x2022epeg (slightly lower than the historical average) respectively. As an industry leader, we believe that the company should enjoy a premium compared with the average valuation of the industry and maintain the “buy” rating of A-Shares and Hong Kong shares.
Investment risk: fluctuation of investment income; Exchange rate changes; R & D projects failed or delayed due to the epidemic.
