Co. 1H21 adj. Non-IFRS net profit grew 68% yoy, in line with CMS estimates, demonstrating strong growth continued in 2Q21
Mgmt. remained confident to deliver a ~30% CAGR over 21-23E
We maintained SOTP-based TP at HKD250. Reiterate BUY on Co.’s leading CXO franchise, and robust growth outlook
2Q21 remained on strong growth trajectory
2Q21 total revenue grew 38% yoy to RMB5,586mn, primarily driven by China-based laboratory (+42% yoy to RMB2,924mn) and CDMO (+56% yoy to RMB1,904mn). Co. highlighted the growth was also fuelled by constant expansion of active customer base (+~820 new active customers to total of 5,220 in 2Q21) and sustained projects growth (+172 new molecules into pipeline, o/w 9 ph2/3 external projects transferred from competitors). 2Q21 clinical CRO service continued growth rebound (+56% yoy) to RMB424mn, helped by strong growth in SMO services and China business recovery. U.S.-based laboratory down 16% yoy owing to sustained impacts of pandemic within the region and the delay of a BLA filing. Overall GPM remained steady at ~37% in 1H21E, and mgmt. expected the stable trend to continue. Strong revenue growth and stable GPM have driven 1H21 adj. non-IFRS net profit to grow 68% yoy to RMB2,448mn (o/w RMB1,505mn in 2Q21, up 71% yoy). Despite FY21E revenue growth guidance remained at ~35% yoy, we reckon the likelihood remained high for a faster-than-guidance FY21E growth.
In expansion mode, the strong gets stronger
Co. highlights its CDMO arm, STA, continued to gain global market share of clinical-stage innovative chemical drugs (up to 14.1% in 2Q21 from 11.5% in 4Q19) thanks to its stronger integrated platform and broader global foothold. Co. continued its expansion mode in 1H21: 1) acquisition BMS DP manufacturing site in Swiss; 2) OXGENE deal to strengthen its CGT scaling up capability; 3) addition of XDC, an ADC CXO platform, JV w/ Wuxi biologics. We believe Co. is well-capitalized to continuously gear up and grow in scale, to achieve a ~30% CAGR in 21-23E.
Reiterate BUY and SOTP-based TP at HKD250
We maintained SOTP-based TP at HKD250. Reiterate BUY on Co.’s leading CRO/CDMO platform, and its robust growth outlook supported by strong CXO demand, its capacity expansion and M&A optionality.