FY21 adj. Non-IFRS net profit grew 41% yoy, in line w/ CMS est.
Mgmt. provides FY22E revenue guidance in the growth range of 65-70%, CAPEX of RMB9-10bn, showing strong growth prospects
We lifted FY22E/23E earnings by 17%/11% to reflect the sanguine guidance. SOTP-based TP revised to HKD250 to largely reflect recent broad-based multiple contraction. Reiterate Top-pick BUY rating.
Robust FY21 results
FY21 total revenue grew 39% yoy to RMB22,902mn, primarily driven by Chemistry (+47% yoy to RMB14,087mn, o/w CDMO remained robust +50% yoy to RMB7,920mn) and Testing (+38% yoy to RMB4,525mn, driven by lab testing +39% yoy offsetting slower recovery in Clinical CRO recovery +27% yoy due to COVID-19 restrictions). Co. highlighted the strong growth was also fuelled by constant expansion of active customer base (~1,660+ new active customers to total of ~5,700+ in 2021) and sustained projects growth (+206 new molecules into pipeline in 4Q21, vs. +169/+172/+185 in 1Q-3Q21). Biology grew 30% yoy to RMB1,985mn, propelled by its strong one-stop CXO platform and rising R&D demand from domestic customers in novel modalities (e.g. oligo, PROTAC, etc.). WuXi ATU, its CGT arm, fell 3% yoy to RMB1,026mn in FY21 owing to decline in U.S. due to pandemic rebound in U.S. and a BLA filing delay by its client, partly offsetting by strong ATU China (+87% yoy). DDSU grew 18% yoy to RMB1,251mn w/ first NDA filing milestone reached in Jul ’21. But mgmt. guided a lower revenue in 2022E as CDE’s policy pivot might adversely affect some ongoing ME-Too projects. That said, we think this short-term headwind won’t loom large long-term attractiveness of this model, and we model total of 7 molecules would be entering the commercial stage by 2025E. Overall GPM down 1.7ppt to ~36% mainly due to USD/RMB depreciation, offsetting by improved utilization rate. Mgmt. expects GPM to be stable in 2022E.
Reiterate Top BUY w/ revised SOTP-based TP of HKD250
We trimmed SOTP-based TP from HKD266 to HKD250 to factor in 1) broad-based multiple contraction across healthcare sector; we now apply higher WACC (from 9.8% to 10%) for CRO, lower PER multiple (from 40x to 35x) for CDMO, 2) earnings forecast upgrades over 22E/23E. Stock down ~35% from its 52wk high due to bearish sentiment rather than an adverse change in fundamentals. We think Co. stock is better positioned to withstand market turbulence given its strong fundamental and valuation now at attractive level (33x FY23 PER, below 1x PEG).