3Q22 adj. Non-IFRS NP grew 82% yoy, beating our est by 4%
Mgmt. raises FY22E revenue growth guidance slightly to +70-72% yoy from prior +68-72% yoy as they gain further visibility
We cut FY23E EPS by 3% despite our earnings forecast upgrades by 6% as RMB depreciation. Maintain BUY w/ trimmed TP of HKD191
　　3Q22 results driven by strong Chemistry segment
　　3Q22 total revenue grew 78% yoy to RMB10,638mn, primarily driven by Chemistry (+115% yoy to RMB7,843mn). CDMO (RMB5,950mn, +164% yoy) and CRO (RMB1,897mn, +36% yoy) in Chemistry segment was largely driven by the COVID project and sustained new projects growth (+219 new molecules into pipeline in 3Q, vs. +217/+256 in 1Q/2Q and avg. of +183/qtr in 2021). Testing (+28% yoy to RMB1,575mn) partly recovered from COVID restriction in 2Q, o/w Lab Testing remain robust +58% yoy but clinical CRO (-15% yoy) remains in face of COVID adversities. Biology (3Q +37% yoy to RMB689mn vs 2Q/1Q +26%/12% yoy) also recovered from 3Q as COVID wanes in Shanghai. In addition, WuXi ATU growth remains modest (+8% yoy to RMB306mn in 3Q) and GP was negative 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 qtrs after utilization ramps up. DDSU remained weak (-30% yoy to RMB217mn) as decreased demand for me-too drug projects. Overall 9M22 GPM was stable at 36.9% and Mgmt. expects GPM to be stable over the course of next couple of quarters.
　　Global funding weakness remains broad-based concerns
　　According to VBdata and our proprietary analysis, 9M22 global funding dropped -36% yoy. We project FY22E global funding to decline 35-40% yoy. We reckon the depressed funding flows will likely lead to a broad- based slowdown in demand or an escalation in project delays. That said, we think Co. is more resilient in the potential industry downtown (top 20 MNCs now represented 45.5% of its revenue).
　　Maintain BUY, SOTP TP revised down to HKD191
　　We raised FY22E/23E earnings forecast by 3%/6% but cut FY23E EPS by 3% to reflect RMB depreciation. We cut SOTP TP to HKD191 from HKD214 to reflect RMB depreciation and we applied more conservative multiples for its investment business. Stock now trades at ~19x FY23 PER, below 1x PEG, which is lower than its global peers avg. of 1.3-1.8x PEG. Investment risk: pandemic risks, geo-political risk, etc.