1Q22 adj. Non-IFRS net profit grew 85.8% yoy, in line w/ CMS est.
Mgmt. maintained FY22E guidance for rev growth at 65-70% yoy; expects 2Q22 growth at 63-65% given COVID disruption assessment
Stock now trades at attractive discount to global major CXOs. Reiterate BUY as Top-pick w/ SOTP-based TP unchanged at HKD250
　　Strong 1Q22 results
　　1Q22 total revenue grew 71% yoy to RMB8,474mn, primarily driven by Chemistry (+102% yoy to RMB6,118mn, o/w non-COVID project grew +52% yoy) and Testing (+32% yoy to RMB1,279mn, driven by Lab Testing +40% yoy offsetting soft Clinical CRO +15% yoy due to COVID-19 restrictions). Co. highlighted the strong growth was also fuelled by constant expansion of active customer base (~320+ new active customers to total of ~5,800+ as of 1Q22) and sustained projects growth (+217 new molecules into pipeline in 1Q22, vs. +169/+172/+185/+206 in 1Q-4Q21).Biology grew 26% yoy to RMB533mn, propelled by its strong one-stop CXO platform and rising domestic demand for novel modalities (e.g. Oligo, PROTAC, etc.). Revenue contribution from new modalities rose to 18% in 1Q22 (vs. 15% in FY21). WuXi ATU grew 37% yoy to RMB299mn in 1Q22 but negative GP expanded due to under-utilized capacities of new Shanghai Lingang site and Philadelphia site. Co. expects WuXi ATU GP to turn profitable in the next 1-2 quarters after utilization ramps up. DDSU declined 22% yoy to RMB241mn as CDE’s policy pivot might adversely affect some ongoing me-too drug projects. But Co. is still seeing strong demand from long tail biotech clients in 1Q22, which should mitigate the growth headwind in the short-term. Overall GPM down 1.0ppt to 35.6% mainly due to changes in revenue mix and lower GPMs in both WuXi ATU and DDSU. Mgmt. expects GPM to be stable for the rest of 2022E.
　　Reiterate BUY as Top-pick w/ intact TP at HKD250
　　We left earnings forecast unchanged and maintained SOTP-based TP of HKD250. Co.’s site in Shanghai has recently been included into the first whitelist that would get priority for resumption of work after Shanghai lockdown. Co. expect its Shanghai site would return to full production by end Apr, which should mitigate concerns about the impacts from restrictive measures. Stock now trades at 26x FY23 PER, below 1x PEG, which is lower than its global peers average of 1.1-1.7x PEG. We think the 30-40% valuation discount has reflected the tighter liquidity in emerging market and geopolitical risks. We think Co. stock is better positioned to withstand market turbulence given its strong fundamental and valuation now at attractive level. Investment risk: COVID-19, geo-political risk, etc.