Investment Rating - The report maintains a "Buy" rating for WuXi Biologics [1][2] Core Views - WuXi Biologics reported a revenue of 8.574 billion RMB for the first half of 2024, a year-on-year increase of 1.0%, with non-COVID revenue growth at 7.7%. The net profit attributable to shareholders was 1.499 billion RMB, a decline of 33.9% year-on-year, while adjusted net profit was 2.545 billion RMB, down 13.0% year-on-year [1] - The company has seen a rapid increase in new projects, with 61 new projects signed in the first half of 2024, approximately half of which are from the United States. The total number of projects reached 742 [1] - The company is actively expanding its global production capacity, with significant developments in its Ireland, Hangzhou, Singapore, and Cranbury facilities [1] - Customer retention remains high, with a total unfulfilled order amount of 20.11 billion USD as of the first half of 2024, indicating strong future revenue potential [1] Summary by Sections Financial Performance - Revenue for the first half of 2024 was 8.574 billion RMB, with a 1.0% increase year-on-year. Non-COVID revenue grew by 7.7%. The net profit attributable to shareholders was 1.499 billion RMB, down 33.9% year-on-year, while adjusted net profit was 2.545 billion RMB, a decrease of 13.0% [1] - Forecasted revenues for 2024-2026 are 18.014 billion RMB, 20.256 billion RMB, and 22.833 billion RMB, with growth rates of 5.7%, 12.4%, and 12.7% respectively [2] Project Development - The company signed 61 new projects in the first half of 2024, with about half from the U.S. The total number of projects reached 742, with significant contributions expected from late-stage clinical and commercial projects [1] - The company’s Ireland facility is seeing strong commercial demand, with plans for further capacity expansion [1] Capacity Expansion - The Ireland facility's MFG6 Phase I has completed its first PPQ, with Phase II expected to commence production this year. The Hangzhou facility is installing three 5000-liter single-use bioreactors, expected to be GMP compliant by the end of 2024 [1] - The company plans to invest approximately 4.8 billion RMB in capital expenditures for 2024, primarily for facility expansions in the U.S. and other regions [1] Customer Retention and Future Orders - Customer retention remains high, with a total unfulfilled order amount of 20.11 billion USD, indicating a strong pipeline for future revenue [1] - Recent agreements, such as the acquisition of a client by Merck for a significant upfront payment, highlight the company's strong position in the market [1]

Investment Rating - The report maintains a "Hold" rating for WuXi Biologics (2269.HK) and lowers the target price to HKD 18.5 from HKD 20 [2][8]. Core Views - The company's 1H24 revenue is broadly in line with expectations, but the adjusted net profit is below expectations due to lower gross margins and higher SG&A expenses. The company maintains its guidance for 2024, expecting high single-digit growth in both revenue and adjusted net profit [2][8]. - The report highlights that the preclinical revenue is growing the fastest, with a 9.2% YoY increase, driven by a recovery in early-stage biopharma financing in Europe and the US. The late-stage clinical revenue also shows a positive trend with an 11.7% YoY increase [2][8]. - The impact of the Biosecurity Act on new project signings has been limited, primarily affecting client decision-making timelines rather than the number of new projects [2][8]. Summary by Sections Financial Performance - 1H24 revenue was RMB 85.7 billion, a 1% increase YoY, while adjusted net profit was RMB 22.5 billion, down 20.7% YoY. The gross margin was 39.1%, down 2.9 percentage points YoY [2][10]. - The company reported a net profit margin of 26.2%, down 7.2 percentage points YoY, attributed to declining gross margins and increased SG&A expenses [2][10]. Revenue Breakdown - By revenue type, preclinical revenue grew 9.2% YoY, while early clinical revenue saw a slight decline. Late-stage clinical revenue recorded an 11.7% increase YoY [2][10]. - The report anticipates accelerated growth in all clinical stages in the second half of the year, with significant contributions expected from new project signings [2][10]. Market Outlook - The company expects to achieve a revenue growth of approximately 5% for the full year 2024, with a target adjusted net profit margin that may face challenges due to overseas operational costs [2][10]. - The report notes that North America remains the fastest-growing region for revenue, with a 27.5% YoY increase, while China experienced a decline of 20.9% YoY [2][10].

Investment Rating - The report maintains a "Buy" rating for WuXi Bio, reflecting a potential upside in the stock price despite geopolitical uncertainties [1]. Core Insights - WuXi Bio reported a revenue of RMB 8.57 billion for the first half of fiscal year 2024, representing a year-on-year growth of 1.0%. The adjusted net profit attributable to the parent company was RMB 2.25 billion, a decline of 20.7% year-on-year [1]. - The company has confirmed its full-year guidance for 2024, expecting both revenue and adjusted net profit to achieve high single-digit growth [1]. - Strong demand from overseas clients is evident, with 61 new integrated projects added in the first half of 2024, including 52 preclinical and 5 I/II clinical projects [1]. - The bioconjugate business has emerged as a significant growth driver, with WuXi XDC's revenue increasing by 68% and adjusted net profit soaring by 147% in the first half of 2024 [1]. Summary by Sections Financial Performance - Revenue for FY 2024 is projected at RMB 17.86 billion, with a year-on-year growth rate of 4.9% [2]. - Adjusted net profit for FY 2024 is estimated at RMB 4.51 billion, reflecting a decline of 4.1% year-on-year [2]. - The company’s earnings per share (adjusted) for FY 2024 is expected to be RMB 1.09, with a projected P/E ratio of 8.8x [2][8]. Market Dynamics - North America accounted for 58.4% of total revenue in the first half of 2024, with a year-on-year growth of 27.5%, primarily driven by U.S. clients [1]. - The total order backlog remained stable at USD 20.11 billion, with a 4% growth over three years [1]. Valuation - The target price has been adjusted from HKD 18.32 to HKD 13.58, indicating a potential decline of 30.6% from the current price of HKD 10.40 [2]. - The report utilizes a 10-year DCF model with a WACC of 10.95% and a terminal growth rate of 2.0% [1][9].

Investment Rating - Maintain BUY with a target price of HK$13.58, down from the previous target price of HK$18.32, indicating a potential upside of 30.6% from the current price of HK$10.40 [2][3]. Core Insights - WuXi Biologics reported a revenue of RMB8.57 billion for 1H24, reflecting a 1.0% year-over-year increase, while adjusted attributable net income decreased by 20.7% year-over-year to RMB2.25 billion [2]. - The company added 61 integrated projects in 1H24, the second-highest in its history, indicating strong demand recovery from overseas customers, particularly in North America where revenue grew by 27.5% year-over-year [2]. - The bioconjugate business, WuXi XDC, saw a significant revenue increase of 68% year-over-year in 1H24, with adjusted net profit surging by 147% year-over-year [2]. - Despite geopolitical uncertainties, management has reaffirmed its full-year guidance for 2024, expecting high-single-digit growth in both revenue and adjusted attributable net income [2]. Financial Summary - For FY24E, revenue is projected at RMB17.863 billion, with a year-over-year growth of 4.9%, while adjusted net profit is expected to decrease by 4.1% to RMB4.508 billion [3][7]. - The company’s revenue growth is forecasted to accelerate in FY25E and FY26E, with expected increases of 11.7% and 12.7% respectively [3][7]. - The adjusted EPS for FY24E is estimated at RMB1.09, with a consensus EPS of RMB0.92 for the same period [3][8]. Valuation Metrics - The adjusted P/E ratio is projected to be 8.8x for FY24E, decreasing to 7.0x by FY26E, indicating a potentially undervalued stock [3][11]. - The DCF valuation suggests a terminal value of RMB87.569 billion, with a WACC of 10.95% and a terminal growth rate of 2.0% [9].

[2024 Interim Results Announcement](index=1&type=section&id=中期業績公告) [Financial Highlights](index=1&type=section&id=財務摘要) In H1 2024, the company's revenue slightly increased by 1.0% to RMB 8.57 billion, but gross profit, net profit, and EPS significantly declined, with gross margin falling from 41.9% to 39.1% and net profit attributable to owners decreasing by 33.9%; no interim dividend was declared | Metric | H1 2024 (RMB million) | H1 2023 (RMB million) | Change | | :--- | :--- | :--- | :--- | | Revenue | 8,574.2 | 8,492.0 | 1.0% | | Gross Profit | 3,350.0 | 3,560.6 | (5.9%) | | Gross Margin | 39.1% | 41.9% | -2.8pp | | Net Profit | 1,780.3 | 2,337.9 | (23.9%) | | Net Profit Attributable to Owners | 1,499.1 | 2,266.7 | (33.9%) | | Adjusted Net Profit Attributable to Owners | 2,250.3 | 2,838.3 | (20.7%) | | Basic Earnings Per Share (RMB) | 0.37 | 0.55 | (32.7%) | - The Board has resolved not to declare any interim dividend for the six months ended June 30, 2024[2](index=2&type=chunk) [Management Discussion and Analysis](index=2&type=section&id=管理層討論及分析) Despite industry challenges, the company maintained robust business growth through its unique CRDMO platform and "follow-the-molecule and win-the-molecule" strategy, with increasing project numbers, strong non-COVID business, and planned global capacity expansion, while profitability faced pressure from product mix shifts and new facility ramp-up, remaining confident in future growth and monitoring the Biosecure Act [Business Review](index=2&type=section&id=業務回顧) [Overall Performance](index=2&type=section&id=整體業績) - Despite challenges, the Group's business developed steadily, with the total number of integrated projects increasing to **742**, including **359** preclinical and **311** early-stage clinical projects[3](index=3&type=chunk) | Development Stage | Number of Projects | | :--- | :--- | | Preclinical Development | 359 | | Early-Stage (Phase I & II) Clinical Development | 311 | | Late-Stage (Phase III) Clinical Development | 56 | | Commercial Manufacturing | 16 | | **Total** | **742** | - Non-COVID revenue increased by **7.7%** year-on-year, and non-COVID late-stage clinical and commercial manufacturing project revenue increased by **11.7%** year-on-year[5](index=5&type=chunk) | Order Type | Amount (USD) | | :--- | :--- | | Unfulfilled Service Orders | 13.00 billion | | Unfulfilled Potential Milestone Payment Orders | 7.105 billion | | **Total Unfulfilled Orders** | **20.105 billion** | | **Unfulfilled Orders within Three Years** | **3.642 billion** | [CRDMO Platform — Research (R)](index=4&type=section&id=CRDMO平台%20—%20研究(R)) - The Group provides comprehensive solutions in drug research and discovery (R), possessing multiple industry-leading technology platforms, including the bispecific antibody platform WuXiBody™ (with approximately **50** collaborations achieved), multispecific antibody platform SDArBodY™, and T-cell engager (TCE) platform[6](index=6&type=chunk) - Strategic collaborations with global leading pharmaceutical companies like GSK, BioNTech, and Medigene accelerate new biologics technology development, strengthening client trust and driving pipeline growth[7](index=7&type=chunk) [CRDMO Platform — Development (D)](index=5&type=section&id=CRDMO平台%20—%20開發(D)) - In the development (D) segment, the Group has enabled over **550** IND filings and continuously iterates its technology platforms to accelerate development and manufacturing[8](index=8&type=chunk) - Core technology platforms include WuXia™ cell line development, WuXiUP™ continuous manufacturing, WuXiUI™ ultra-high intensification fed-batch culture, and WuXiHigh™ high-concentration formulation development, which significantly improve production efficiency, product quality, and reduce costs[8](index=8&type=chunk)[9](index=9&type=chunk) [CRDMO Platform — Manufacturing (M)](index=7&type=section&id=CRDMO平台%20—%20生產(M)) - In the manufacturing (M) segment, late-stage clinical and non-COVID commercial projects steadily grew to **72**, with **4** new "win-the-molecule" projects added[10](index=10&type=chunk) - During the reporting period, global manufacturing success rate was approximately **98%**, and drug substance and drug product PPQ (Process Performance Qualification) project success rates exceeded **97%**, laying a solid foundation for commercial manufacturing growth[10](index=10&type=chunk) [New Business Drivers](index=8&type=section&id=新業務驅動) - New business platforms such as the Microbial Platform, WuXi XDC (ADC and Bioconjugate CRDMO), and WuXi Vaccines (Vaccine CRDMO) are flourishing, becoming significant drivers of the Group's growth[11](index=11&type=chunk) - WuXi XDC has secured **167** ADC and other bioconjugate projects, with **29** in Phase II/III[11](index=11&type=chunk) [Quality](index=9&type=section&id=質量) - Since 2017, the Group has successfully completed **37** regulatory inspections by various authorities, including the US FDA and EU EMA, without major findings, and over **1,400** global client GMP audits[12](index=12&type=chunk) [ESG](index=9&type=section&id=ESG) - The Group demonstrates outstanding ESG performance, earning multiple international recognitions including inclusion in the Dow Jones Sustainability World Index, MSCI ESG rating of **AAA**, EcoVadis Platinum rating, and CDP Water Security A and Climate Change A- ratings[13](index=13&type=chunk) [Regional Operations](index=10&type=section&id=區域運營) - The Hangzhou, China site added three **5,000-liter** single-use bioreactors, increasing total capacity to **23,000 liters**[14](index=14&type=chunk) - Phase I of the MFG6 facility at the Ireland, Europe site completed its first PPQ project, Phase II is progressing as planned with nearly all 2025 capacity reserved, and the Germany site will construct a second pre-filled syringe filling line[14](index=14&type=chunk) - The Boston, US research service center has opened, and the New Jersey manufacturing facility is nearing GMP-ready status[15](index=15&type=chunk) - The Singapore site has officially commenced construction, with engineering progress on schedule[15](index=15&type=chunk) [WBS (WuXi Biologics Lean Operation Management System)](index=11&type=section&id=WBS（藥明生物精益運營管理系統）) - By implementing approximately **60** WBS improvement projects, the Group achieved significant cost savings, inventory reduction, labor hour savings, and quality enhancements during the reporting period[16](index=16&type=chunk) [Future Outlook](index=12&type=section&id=未來展望) - Despite macroeconomic uncertainties, the Group remains confident in business growth, leveraging its CRDMO business model and "follow-the-molecule and win-the-molecule" strategy[17](index=17&type=chunk) - Regarding the proposed US Biosecure Act, the company reiterates that its business does not involve human genomics or collect human genomic data, firmly believing it poses no national security risk to any country, and will closely monitor the legislative process to ensure compliant operations[17](index=17&type=chunk) [Financial Review](index=13&type=section&id=財務回顧) [Revenue Analysis](index=13&type=section&id=收益) - Total revenue for H1 2024 was **RMB 8.574 billion**, a slight year-on-year increase of **1.0%**, primarily driven by non-COVID business, especially rapidly developing technology platforms like ADC and bispecific antibodies[18](index=18&type=chunk) | Region | H1 2024 Revenue (RMB million) | Share | H1 2023 Revenue (RMB million) | Share | | :--- | :--- | :--- | :--- | :--- | | North America | 5,009.7 | 58.4% | 3,927.9 | 46.3% | | Europe | 1,863.0 | 21.7% | 2,551.6 | 30.0% | | China | 1,417.9 | 16.6% | 1,792.5 | 21.1% | | Others | 283.6 | 3.3% | 220.0 | 2.6% | | Stage | H1 2024 Revenue (RMB million) | Share | | :--- | :--- | :--- | | Pre-IND Services | 3,068.0 | 35.8% | | Early-Stage (Phase I/II) Clinical Development | 1,893.0 | 22.1% | | Late-Stage (Phase III) & Commercialization | 3,434.4 | 40.0% | | Others | 178.8 | 2.1% | | Business Segment | H1 2024 Revenue (RMB million) | Share | | :--- | :--- | :--- | | Biologics | 6,961.6 | 81.2% | | XDC | 1,612.6 | 18.8% | [Cost and Profit Analysis](index=15&type=section&id=毛利及毛利率) - Cost of sales increased by **5.9%** year-on-year to **RMB 5.224 billion**[24](index=24&type=chunk) - Gross profit decreased by **5.9%** year-on-year to **RMB 3.350 billion**, with gross margin falling from **41.9%** to **39.1%**[25](index=25&type=chunk) - The decline in gross margin was primarily due to (i) the absence of high-margin significant discovery service transactions present in the prior period, (ii) slightly lower utilization rates at China facilities due to COVID-19 project cancellations, and (iii) the ramp-up impact of new facilities in Ireland, Germany, and the US[25](index=25&type=chunk)[26](index=26&type=chunk) - Net profit decreased by **23.9%** year-on-year to **RMB 1.780 billion**, with net profit margin falling from **27.5%** to **20.8%**, mainly due to reduced gross profit, increased selling, marketing, and administrative expenses, and net foreign exchange losses[35](index=35&type=chunk) [Expense Analysis](index=17&type=section&id=銷售及營銷開支) - Selling and marketing expenses increased by **111.7%** year-on-year to **RMB 223 million**, primarily for expanding regional presence and market promotion[30](index=30&type=chunk) - Administrative expenses increased by **13.7%** year-on-year to **RMB 773 million**, supporting business expansion and the establishment of independent functions post-WuXi XDC's listing[31](index=31&type=chunk) - Research and development expenses were **RMB 344 million**, consistent with the prior period, reflecting continued investment in innovative technology platforms[32](index=32&type=chunk) [Balance Sheet Analysis](index=19&type=section&id=物業、廠房及設備) - Property, plant, and equipment balance increased by **3.2%** to **RMB 28.259 billion**, reflecting continuous investment in global facility construction[37](index=37&type=chunk) - Inventories increased by **11.1%** to **RMB 1.963 billion**, primarily due to stock preparation for European entity ramp-up and WuXi XDC business expansion[43](index=43&type=chunk) - Trade and other payables decreased by **20.9%** to **RMB 2.180 billion**, mainly due to the payment of 2023 annual bonuses and reduced payables for facility construction[47](index=47&type=chunk) [Liquidity and Capital Resources](index=22&type=section&id=流動性及資金來源) - As of June 30, 2024, total bank balances, cash, and time deposits were **RMB 9.494 billion**, a **5.2%** decrease from the beginning of the year[50](index=50&type=chunk) - As of June 30, 2024, total borrowings were approximately **RMB 2.157 billion**, largely consistent with the beginning of the year[52](index=52&type=chunk) - The gearing ratio (interest-bearing borrowings/total equity) was **4.8%**, consistent with **4.9%** at the end of 2023, maintaining a healthy level[56](index=56&type=chunk) [Non-IFRS Measures](index=24&type=section&id=非國際財務報告準則指標) | Metric (RMB million) | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Net Profit | 1,780.3 | 2,337.9 | | **Adjusted Net Profit** | **2,544.8** | **2,925.6** | | **Adjusted Net Profit Attributable to Owners** | **2,250.3** | **2,838.3** | | Adjusted Net Profit Margin | 29.7% | 34.5% | | Metric (RMB million) | H1 2024 | H1 2023 | | :--- | :--- | :--- | | Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) | 2,805.9 | 3,230.6 | | **Adjusted EBITDA** | **3,570.4** | **3,818.3** | | Adjusted EBITDA Margin | 41.6% | 45.0% | [Other Information](index=26&type=section&id=其他信息) [Employees and Remuneration Policy](index=26&type=section&id=僱員及薪酬政策) - As of the end of the reporting period, the Group had a total of **12,435** employees, including approximately **4,200** research personnel, with an overall talent retention rate of approximately **94%**[60](index=60&type=chunk) [Interim Dividend](index=27&type=section&id=中期股息) - The Board resolved not to declare any interim dividend for the six months ended June 30, 2024[61](index=61&type=chunk) [Corporate Governance and Compliance](index=27&type=section&id=遵守企業管治守則) - During the reporting period, the company complied with all code provisions of the Corporate Governance Code, except for a deviation from code provision F.2.2 where some directors were unable to attend the annual general meeting due to other commitments[62](index=62&type=chunk) - All directors confirmed compliance with the Model Code for Securities Transactions by Directors and the company's written guidelines during the reporting period[63](index=63&type=chunk) [Use of Proceeds from Placing](index=28&type=section&id=配售所得款項用途) - Regarding the net proceeds of approximately **RMB 10.9 billion** from the February 2021 placing, as of June 30, 2024, approximately **RMB 9.16 billion** has been utilized, with approximately **RMB 1.74 billion** remaining unutilized, primarily for acquiring additional manufacturing capacity and investing in mRNA-related technologies[64](index=64&type=chunk)[65](index=65&type=chunk) [Purchase, Sale or Redemption of the Company's Listed Securities](index=29&type=section&id=購買、出售或贖回本公司上市證券) - During the reporting period, the company repurchased a total of **76,909,000** shares on the Stock Exchange for a total purchase price of approximately **HKD 1.355 billion**[66](index=66&type=chunk)[67](index=67&type=chunk) [Condensed Consolidated Financial Statements](index=31&type=section&id=簡明綜合財務報表) The financial statements detail the Group's H1 2024 financial performance and period-end financial position, with the income statement reflecting stable revenue but declining profit due to lower gross margin and increased expenses, while the balance sheet shows steady total asset growth driven by fixed asset investments and a stable liability structure, indicating a robust overall financial position [Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=32&type=section&id=簡明綜合損益及其他全面收益表) | Item (RMB thousand) | H1 2024 (Unaudited) | H1 2023 (Unaudited) | | :--- | :--- | :--- | | Revenue | 8,574,214 | 8,492,046 | | Gross Profit | 3,349,951 | 3,560,634 | | Profit Before Tax | 2,008,377 | 2,528,976 | | Profit for the Period | 1,780,310 | 2,337,860 | | Profit Attributable to Owners of the Company | 1,499,080 | 2,266,675 | [Condensed Consolidated Statement of Financial Position](index=34&type=section&id=簡明綜合財務狀況表) | Item (RMB thousand) | June 30, 2024 (Unaudited) | December 31, 2023 (Audited) | | :--- | :--- | :--- | | **Non-current Assets** | **36,288,978** | **35,377,477** | | Property, Plant and Equipment | 28,258,954 | 27,377,643 | | **Current Assets** | **19,816,741** | **21,198,249** | | Bank Balances and Cash | 9,153,528 | 9,669,839 | | **Total Assets** | **56,105,719** | **56,575,726** | | **Current Liabilities** | **6,808,244** | **7,636,020** | | **Non-current Liabilities** | **4,656,660** | **4,921,824** | | **Total Liabilities** | **11,464,904** | **12,557,844** | | **Total Equity** | **44,640,815** | **44,017,882** | [Notes to the Condensed Consolidated Financial Statements](index=36&type=section&id=簡明綜合財務報表附註) - The financial statements are prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting," with accounting policies consistent with the 2023 annual report[76](index=76&type=chunk)[77](index=77&type=chunk) - Operating segments are primarily divided into Biologics and XDC, with external sales revenue for H1 2024 being **RMB 6.962 billion** for the Biologics segment and **RMB 1.613 billion** for the XDC segment[84](index=84&type=chunk) - As of June 30, 2024, trade receivables aging shows **RMB 3.418 billion** as not overdue, accounting for approximately **59.7%** of the total[102](index=102&type=chunk)

Investment Rating - The report maintains a "Neutral" rating for WuXi Biologics (2269 HK) with a target price adjusted to HKD 13.00 [2][10]. Core Views - The company's performance for 2024-25 is expected to fall short of expectations due to a decline in R&D spending from domestic innovative drug companies and uncertainties surrounding the U.S. Biologics Safety Act, which may affect long-term orders from U.S. clients [1][2]. - The report highlights that the U.S. House of Representatives has passed a milder version of the Biologics Safety Act, which allows an 8-year transition period for U.S. pharmaceutical companies to phase out collaborations with the company, but the long-term trend remains towards a gradual exit starting in 2028 [1][2]. Financial Summary - Total revenue for 2024 is projected at RMB 17,963 million, with a growth rate of 5.5% compared to 2023 [3][8]. - Shareholder net profit is expected to be RMB 3,666 million in 2024, reflecting a growth rate of 7.8% [3][8]. - Adjusted net profit for 2024 is forecasted at RMB 4,778 million, with a growth rate of 1.7% [3][8]. - The company’s revenue from the U.S. is projected to account for 47.4% of total revenue in 2023, indicating significant reliance on the U.S. market [2][3]. Adjustments and Projections - Revenue forecasts for 2024 and 2025 have been reduced by 7.1% and 12.4%, respectively, while shareholder net profit estimates have been lowered by 16.2% and 18.3% for the same periods [1][2]. - The report adjusts the DCF model's perpetual growth rate assumption to 1.0% due to concerns about the company's long-term outlook [2][3].

Financial Performance - Revenue grew by 11.6% year-on-year to RMB 17,034.3 million, with non-COVID revenue increasing by 37.7%[7] - The company's revenue for the year 2023 reached RMB 17,034.3 million, representing a year-on-year growth of 11.6%[16] - Non-COVID revenue surged by 37.7% year-on-year, while revenue from late-stage and commercial production projects increased by 101.7%[16] - The company achieved a gross profit of RMB 6,827.9 million, reflecting a year-on-year increase of 1.5%[16] - The adjusted net profit attributable to the company’s owners decreased by 4.6% to RMB 4,698.9 million[16] - Net profit decreased by 21.5% from approximately RMB 4,549.9 million for the year ended December 31, 2022, to approximately RMB 3,570.6 million for the year ended December 31, 2023, with a net profit margin dropping from 29.8% to 21.0%[49] - Basic earnings per share fell by 22.6% from RMB 1.06 for the year ended December 31, 2022, to RMB 0.82 for the year ended December 31, 2023[50] - The group's gross profit increased by 1.5% from approximately RMB 6,724.0 million for the year ended December 31, 2022, to approximately RMB 6,827.9 million for the year ended December 31, 2023, while the gross profit margin decreased from 44.0% to 40.1%[39] Project and Order Growth - The total number of projects increased to 698, with 132 new projects added in 2023[7] - The total unfulfilled orders reached $20.592 billion as of December 31, 2023[7] - The total number of ongoing projects increased from 588 to 698, including a record 132 new projects added during the year[14] - The number of commercial production projects reached 24 by the end of the reporting period[9] - The number of commercial production projects increased from 17 to 24, with nine new late-stage and commercial production projects added, marking a historical high[14] Cash Flow and Financial Stability - The company maintained positive free cash flow, supporting capacity enhancement and investment in cutting-edge technologies[7] - The company maintained a positive free cash flow, providing a solid financial foundation for sustainable growth[16] - The total value of unfinished orders grew to USD 20,592 million, including USD 13,398 million in service orders and USD 7,194 million in potential milestone payments[16] - The company's bank balances and cash, along with time deposits, increased by 49.4% from approximately RMB 6,699.7 million to approximately RMB 10,009.8 million, primarily due to net proceeds from the independent listing of WuXi AppTec[64] Regulatory and Quality Assurance - The company has completed 33 regulatory inspections by global authorities since 2017, with no major issues found[9] - The company has successfully passed multiple regulatory assessments from agencies such as the US FDA, EU EMA, and China's NMPA under the guidance of its senior vice president of global quality[90] - The company has established a robust business continuity management system to address potential disruptions from natural disasters and pandemics[109] Research and Development - The company enabled 110 new drug clinical trials (IND) and launched new technology platforms during the reporting period[8] - The CRDMO platform has enabled the company to empower 110 INDs during the reporting period[19] - The proprietary WuXiaTM platform has delivered over 800 cell lines, including five commercialized products, and can support 150 integrated CMC projects annually[20] - The company has made significant improvements in its single B cell cloning technology, enhancing the generation of therapeutic antibody leads[18] - The company has a strong pipeline with over 20 U.S. patents and 40 publications co-authored by Dr. Gu, indicating robust research and development efforts[86] Market Expansion and Partnerships - The company is expanding regional operations in the US, Ireland, Germany, and Singapore, with significant capacity increases announced[9] - The company has established partnerships with the top 20 global pharmaceutical companies, expanding its diverse customer base significantly[16] - The company aims to enhance operational efficiency and scale through WBS, accelerating the discovery, development, and production of global biopharmaceuticals[30] Leadership and Governance - Dr. Chen Zhisheng has been appointed as the Executive Director and CEO since February 2014, with extensive experience in biopharmaceutical development and production[76] - The company is focused on expanding its board with experienced professionals from diverse backgrounds to enhance governance and strategic direction[81][82][83][84] - The board consists of a balanced mix of executive and independent non-executive directors, ensuring strong independence and effective decision-making[155] - The company has established a board independence assessment mechanism since 2022 to ensure strong independence and effective judgment by the board[162] Environmental, Social, and Governance (ESG) - The company received recognition for its ESG achievements, including inclusion in the Dow Jones Sustainability World Index and an MSCI AAA rating[10] - The company has joined the Science Based Targets initiative (SBTi) and established a dedicated DEI committee, enhancing its ESG performance recognition[25] - The environmental, social, and governance (ESG) committee conducted one meeting to review the company's ESG practices and carbon emissions updates during the reporting period[186] Shareholder Management and Corporate Actions - The company has not declared any final dividends for the year ended December 31, 2023[138] - The company has a pre-IPO share option plan that allows for the issuance of up to 155,223,409 shares, representing approximately 3.64% of the total issued shares[7] - The company has implemented stock option plans for employees under WuXi XDC and WuXi Vaccines, resulting in the cancellation of unvested restricted shares[128] - The company emphasizes the importance of effective communication with shareholders to enhance investor relations and understanding of business performance and strategies[200] Risk Management - The company emphasizes a robust risk management system to evaluate significant risks, including operational, financial, and regulatory risks[101] - The company has established a risk management mechanism to support effective decision-making aligned with its mission and vision[189] - The board confirmed its responsibility for the effectiveness of risk management and internal control systems, which aim to manage risks rather than eliminate them[188]

Investment Rating - The report assigns a "Buy" rating for the company with a target price of HKD 18.5, indicating a potential upside of 29.3% from the current price of HKD 14.34 [3][4]. Core Insights - The company's adjusted net profit attributable to shareholders decreased by 4.6% year-on-year in 2023, with total revenue increasing by 11.6% to RMB 17.034 billion. Non-COVID revenue rose by 37.7% to RMB 16.51 billion, while COVID-related revenue decreased by 83.9% to RMB 0.53 billion [2][3]. - The gross profit margin declined by 3.9 percentage points to 40.1% due to the ramp-up of new overseas production facilities. Other income fell significantly from RMB 7.7 billion in 2022 to RMB 0.4 billion in 2023 due to reduced foreign exchange gains and losses in fair value of equity investments [2][3]. - The company reported a total of 698 projects in 2023, an increase of 132 projects, with a notable rise in monoclonal antibody projects and ADC projects [2][3]. Financial Summary - Revenue for 2023 was RMB 17,034 million, with a growth rate of 11.6%. The adjusted net profit was RMB 34.0 billion, reflecting a year-on-year decline of 23.1% [2][4]. - The company’s net cash position at the end of 2023 was RMB 9.1 billion, with free cash flow reported at RMB 0.6 billion [2][3]. - The projected revenue for 2024 is RMB 17,895 million, with expected growth rates of 5.1% [4]. Capacity and Production - The company's production capacity reached 276,000 liters in 2023, with expectations to increase to 610,000 liters. Approximately 40% of the capacity is located overseas to mitigate geopolitical risks [3][4]. - The Irish facility is expected to achieve significant commercial production and break-even by 2024, with full capacity anticipated by 2025 [3][4]. Market Position and Risks - The company has a total order volume of USD 20.6 billion, with a slight decrease in unfulfilled service orders by 1% year-on-year [2][3]. - Concerns regarding the company's future CMO business due to potential policy uncertainties in the U.S. market are noted, particularly with the Senate's proposed Biosecurity Act [3][4].

Investment Rating - The report maintains an "Accumulate" rating for WuXi Biologics (2269) [1][3]. Core Views - The company's non-COVID business revenue reached 16.506 billion yuan, a year-on-year increase of 37.7%, with overseas investment and financing recovering steadily, and the number of new projects exceeding expectations, indicating a positive long-term outlook [3]. - For 2023, the company reported total revenue of 17.034 billion yuan (+11.6%) and a net profit attributable to shareholders of 3.4 billion yuan (-23.1%), with adjusted net profit at 4.95 billion yuan (-2.0%) [3]. - The gross profit margin was 40.1%, down 3.9 percentage points, impacted by capacity ramp-up and operational efficiency improvements from WBS [3]. - The projected net profit for 2024-2026 is estimated at 3.544 billion yuan (5.4% growth), 4.491 billion yuan (20.5% growth), and 5.793 billion yuan (24.5% growth) respectively, with adjusted net profit estimates of 5.030 billion yuan, 6.062 billion yuan, and 7.467 billion yuan [3]. - The target price has been adjusted down to 20.5 HKD (-17.3%), corresponding to a 2024 PE of 16X [3]. Financial Summary - The company reported a revenue of 17.051 billion yuan in 2023, with a projected revenue of 17.949 billion yuan in 2024, reflecting a 5% growth [7]. - The net profit for 2023 was 3.4 billion yuan, with expectations of 3.544 billion yuan in 2024, indicating a 4% increase [7]. - The PE ratio for 2023 is 33.21, with projections of 15.81 for 2024, 12.47 for 2025, and 9.67 for 2026 [7]. Project and Capacity Development - The number of new projects exceeded expectations, with total new projects in 2023 being 132, and a significant increase in non-COVID project revenue by 101.7% [3]. - The company expects revenue growth of 5%-10% in 2024, with non-COVID business projected to grow by 8%-14% [3]. - The European revenue contribution reached 30.2% (+13.5 percentage points), with a year-on-year growth of 172.4%, while North America accounted for 47.7% (-8.2 percentage points) with a 20.2% increase [3].

Investment Rating - The report maintains a "Buy" rating for WuXi Biologics (2269.HK) with a market price of HKD 13.36 [2]. Core Insights - WuXi Biologics continues to experience rapid growth in non-COVID-related business, with expectations for gradual industry recovery [6]. - The company reported a revenue of HKD 17.05 billion in 2023, representing a year-on-year growth of 11.5%, while net profit decreased by 23.1% to HKD 3.40 billion [6][7]. - Excluding COVID-19 impacts, revenue growth was nearly 40%, with non-COVID revenue reaching approximately HKD 16.51 billion, a 37.7% increase [6][7]. - The company has a robust project pipeline, with 698 total projects, including 51 in Phase III and 24 commercial projects, indicating strong future growth potential [6][7]. Financial Performance Summary - **Revenue Forecasts**: Projected revenues for 2024, 2025, and 2026 are HKD 17.98 billion, HKD 20.75 billion, and HKD 24.52 billion, respectively, with growth rates of 5.6%, 15.4%, and 18.2% [3][6]. - **Net Profit Forecasts**: Expected net profits for the same years are HKD 3.52 billion, HKD 4.30 billion, and HKD 5.30 billion, with growth rates of 3.6%, 21.9%, and 23.3% [3][6]. - **Key Financial Ratios**: The company’s P/E ratio is projected to decrease from 15.2 in 2023 to 9.7 by 2026, indicating improved valuation attractiveness [3][6]. Business Model and Growth Drivers - The CRDMO business model is expected to continue delivering results, with a significant increase in CMO projects anticipated [6]. - The XDC platform, vaccine projects, and dual antibody platforms are expected to contribute to new growth momentum, with 143 ADC projects and 25 vaccine projects currently in progress [6][7]. - The company has a strong order backlog, with an expected total order value of USD 3.85 billion over the next three years [6][7].