【行业研究报告】药明生物-Expand overseas capacity to mitigate risks

28Mar2024
CMBInternationalGlobalMarkets|EquityResearch|CompanyUpdate
WuXiBiologics(2269HK)
Expandoverseascapacitytomitigaterisks
WuXiBiologics(WuxiBio)reported2023revenueofRMB17.03bn,up11.6%
YoY,attributablenetincomeofRMB3.40bn,down23.1%YoY,andadjusted
attributablenetincomeofRMB4.70bn,down4.6%YoY.Bothrevenueand
adjustedattributablenetincomewerein-linewithourforecasts.Ifexcluding
COVIDrevenue,totalrevenuewouldincreaseby37.7%YoY,andrevenuefrom
late-stageandCMOprojectswouldsurgeby101.7%YoY.Totalbacklogstood
atUS$20.59bnasofend-2023withbacklogwithinthreeyearsgrowingby6.4%
YoY.Consideringtherecoverymomentumofglobalbiotechfundingandthe
potentialgeopoliticalimpactonits“Win-the-Molecule”projects,management
expectsthetotalrevenuetogrowby5-10%YoYandnon-COVIDrevenueto
growby8-14%YoYin2024E.
Earlysignsofindustrydemandrecovery.WuXiBiomaintainedsolid
growthinnon-COVIDrevenuein2023.IfexcludingCOVIDrevenue,the
growthinnon-COVIDrevenuein2023.IfexcludingCOVIDrevenue,the
totalrevenuewouldincreaseby37.7%YoYin2023,andrevenuefromlate-
stageandCMOprojectswouldjumpby101.7%YoY.Thisprovessolid
clientdemandforWuXiBio’sservicesinthepost-COVIDera.
Geographically,non-COVIDrevenuefromEurope,NorthAmericaandother
regions(ex.China)grewby172.4%,20.2%and37.7%YoY,respectively.
Non-COVIDrevenueinChinaslightlydeclinedby1.2%YoYin2023dueto
biotechfundingconstraints.Meanwhile,wenoticedearlysignsofindustry
demandrecoverysuchastheYTDreboundinglobalbiotechfunding.Thus,
weexpectsteadygrowthforWuXiBio’snon-COVIDrevenuein2024E.
TheEuropeanmarketgrewrapidlytomitigategeopoliticalimpact.
Supportedbydemandfromclientsacrossvariousbusinesssizes,revenue
fromEuropeanmarketimpressivelyincreasedby101.9%YoYin2023,
contributing30.2%ofWuXiBiorevenue.Accordingtothemanagement,
Europeanclientstendtobelesssensitivetogeopolitics.Wethinkexpanding
revenuefromEuropeanmarketwillhelpWuXiBiotoreduceitsbusiness
relianceontheUSmarket.Withamaturingmanufacturingnetworkin
IrelandandGerman,managementexpectsitsstrongperformanceintheEU
markettocontinue.
Sharebuybacktounderscoremgt.’sconfidenceinbusiness.According
toanannouncementon5Dec2023,WuXiBiohasinitiatedashare
repurchaseplanwithanaggregatevalueuptoUS$600mn.Asofend-2023,
theCompanyhasrepurchased34.8mnH-shareswithatotalvalueof
HK$1.0bn(~US$129mn).Basedonourcalculation,thenumberofshare
repurchasedbyWuXiBioYTDhasreached47.6mnwithatotalvalueof
HK$972mn(~US$125mn).TheCompanyretainsthecapacityto
repurchasesharesvaluedat~US$346mn,representing~4.6%ofWuXi
Bio’slatestmarketcap.Managementanticipatesthecontinuationofshare
buybacks.
MaintainBUY.Toreflectthegeopoliticaluncertainties,wecutourTPfrom
HK$39.65toHK$18.32,basedona10-yearDCFmodelwithWACCof
10.95%andterminalgrowthof2.0%.WeforecastWuXiBio’srevenueto
growby5.2%/13.6%/13.9%YoYandattributableadj.netincometo
increaseby7.5%/14.5%/13.9%YoYin2024E/25E/26E,respectively.