Preannouncement: Recurring net profit up 68.0-70.0% YoY in 2021
WuXi Apptec released a positive profit alert for 2021, and preannounced results for the year, estimating that: 1) revenue increased 38.0-38.5% YoY to Rmb22.82-22.9bn; 2) net profit attributable to shareholders grew 68.0-70.0% YoY to Rmb4.97-5.03bn; 3) recurring net profit attributable to shareholders climbed 68.0-70.0% YoY to Rmb4.01-4.05bn; 4) the gain from fair value change and investment income of certain non-current financial assets came in at around Rmb1.66bn (vs. around Rmb1.79bn in 2020 - the gain fluctuated due to the fluctuation of the listed companies invested by WuXi Apptec); 5) the non-cash fair value loss on the derivative instrument portion of the H-share convertible bonds of the firm came in at around Rmb1bn (vs. around Rmb1.35bn in 2020); and 6) the firm completed the transfer of assets to Wuxi XDC with a net disposal gain of around Rmb274mn.
Trends to watch
Demand for the integrated and end-to-end contract research, development and manufacturing organization (CRDMO) business remains strong.
Global production capacity continues to increase; preparation commercialization capability improves.
Cell and gene therapies - projects in the pipeline and production capacity continue to increase globally.
See page 3 for details.
Valuation and recommendation
As demand related to the firm's principal business remains strong, we raise our net profit forecast by 18.6% to Rmb4.99bn for 2021 and by 11.6% to Rmb5.77bn for 2022. We introduce a net profit forecast for 2023 of Rmb7.75bn. Considering the recent systematic adjustment of the pharmaceutical sector, we maintain OUTPERFORM ratings for both A- and H-shares. We maintain our DCF-based A- and H-share target prices at Rmb174.0 and HK$184.0, offering 55.4% and 50.4% upsides.
Risks
Order fluctuations; forex risk; investment loss and/or fair value loss.