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].

研究报告Research Report 4 Apr 2024 药明生物 Wuxi Biologics Cayman (2269 HK) 2023年报点评：收入利润稳健增长，看好公司多项技术平台驱动一体化CRDMO龙头长期增长 Revenue and profit grew steadily, optimistic about long-term growth driven by multiple technology platforms [观Ta点bl聚e_焦yem Inevie1s] tment Focus [Tab维le_持Inf优o] 于大市Maintain OUTPERFORM (Please see APPENDIX 1 for English summary) 事件 评级 优于大市OUTPERFORM 现价 HK$14.20 公司发布2023年业绩：2023年，公司收入170.34亿元，同比增长 目标价 HK$30.88 11.6%，非新冠项目收入 165.1 亿元，同比增长 37.7%。毛利率 HTI ESG 5.0-3.2-4.0 40.1%（-3.9pp），经调整归母纯利 47.0 亿元，同 ...

Investment Rating - The investment rating for WuXi Biologics (02269.HK) is "Buy" [3][22]. Core Views - The company achieved a revenue of 17.034 billion yuan in 2023, representing a year-on-year growth of 11.56%, while the net profit attributable to shareholders decreased by 23.09% to 3.4 billion yuan due to several factors including capacity ramp-up, reduced investment income, and increased operational expenses [4][8]. - Non-COVID projects have shown significant growth, with non-COVID revenue reaching 16.506 billion yuan, a year-on-year increase of 37.7%, accounting for 96.9% of total revenue [4][10]. - The company has made substantial progress in its dual antibody technology, WuXiBody™, with 45 collaborations established, and several projects expected to receive IND approval in 2024 [15][18]. - The company is expanding its global production capacity with ongoing projects in Ireland, Germany, the United States, and Singapore, aiming to enhance its global service capabilities [18][20]. - WuXi Biologics has maintained a robust quality system, successfully passing 33 regulatory inspections from major global authorities since 2017, establishing itself as a leader in commercial production in China [20][22]. Summary by Sections Financial Performance - In 2023, the company reported a total revenue of 17.034 billion yuan, with a net profit of 3.4 billion yuan, reflecting a decrease in profit margins due to various operational challenges [4][8]. - The overall gross margin for 2023 was 40.08%, down 3.95 percentage points year-on-year, while the net margin was 19.96%, down 8.99 percentage points [8][10]. Non-COVID Projects - Non-COVID related revenue surged to 16.506 billion yuan, marking a 37.7% increase, with late-stage clinical and commercial production projects seeing a remarkable 101.7% growth [4][10]. - The total number of projects reached 698, with 24 commercial production projects, and a record number of new non-COVID projects added [10][15]. Technological Advancements - The WuXiBody™ technology has been recognized in the industry, with multiple projects in various stages of development, showcasing the company's innovative capabilities [15][18]. Global Expansion - The company is actively enhancing its global production capabilities, with facilities in multiple countries expected to achieve operational milestones ahead of schedule [18][20]. Quality Assurance - WuXi Biologics has established a comprehensive quality system, achieving certifications from major regulatory bodies, which underscores its commitment to quality in biopharmaceutical production [20][22].

Investment Rating - The investment rating for WuXi Biologics (02269.HK) is "Buy" (maintained) [2][5][12] Core Views - Non-COVID business shows robust growth, with total revenue for 2023 reaching 17.051 billion yuan, a year-on-year increase of 11.5%. Non-COVID projects generated revenue of 16.506 billion yuan, up 37.7% year-on-year [5][6] - The company has a strong order backlog, with total unfulfilled orders increasing to 20.592 billion USD by the end of 2023, providing a solid foundation for future revenue growth [5][6] - The company is accelerating its global capacity expansion, with significant growth in its European operations, which have become the fastest-growing market for the company [7] Financial Summary - Revenue for 2023 was 17.051 billion yuan, with a net profit of 3.400 billion yuan, reflecting a year-on-year decline of 23.1%. Adjusted net profit was 4.699 billion yuan, down 4.6% [5][8] - The projected net profits for 2024-2026 are 4.047 billion yuan, 5.047 billion yuan, and 6.257 billion yuan respectively, with corresponding EPS of 0.95, 1.19, and 1.47 yuan [5][8] - The company’s P/E ratios for 2024-2026 are projected to be 13.8, 11.1, and 9.0 times respectively, indicating a favorable valuation compared to its peers [5][8] Project and Market Development - As of the end of 2023, the company had a total of 698 projects, an increase of 18.7% year-on-year, with significant contributions from late-stage clinical and commercialization projects [6][7] - The company is building a CRDMO service center in Singapore with a designed capacity of approximately 120,000 liters, and its Irish facility is expected to reach breakeven in 2024 [7]

Investment Rating - The report maintains a "Hold" rating for WuXi Biologics (2269.HK) and lowers the target price to HKD 20, indicating a potential upside of 45% from the current price of HKD 13.76 [2][4]. Core Views - The revenue growth guidance for 2024 is set at 5%-10%, which is significantly below previous expectations and market consensus [2][3]. - The company’s 2023 revenue reached RMB 17 billion, reflecting an 11.6% year-over-year increase, while the adjusted net profit was RMB 4.7 billion, down 4.6% year-over-year [3][9]. - The report highlights that geopolitical factors are expected to impact the company's stock price in the short term [2][3]. Financial Summary - For 2023, total revenue was RMB 170 billion, with non-COVID revenue growing by 37.7% year-over-year [3]. - The adjusted net profit for 2023 was RMB 47 billion, which was slightly above market expectations [3]. - The gross margin for 2023 was 40.1%, marking a decline of 3.9 percentage points year-over-year, attributed to the ramp-up of overseas production capacity [3][9]. - The second half of 2023 saw a revenue increase of only 6% year-over-year, primarily driven by XDC revenue growth [3][9]. - The company expects approximately 70% of its 2024 revenue to be secured from orders on hand by the end of 2023 [3]. Revenue and Profit Forecast - The revenue forecast for 2024 is adjusted downwards, with expectations of RMB 17.9 billion, reflecting a 5.3% increase year-over-year [8][11]. - The adjusted net profit for 2024 is projected to be RMB 3.6 billion, representing a 7.3% increase year-over-year [8][11]. - The report introduces financial forecasts for 2026, with expected revenue of RMB 21.6 billion and net profit of RMB 4.6 billion [8][11]. Market Performance - The stock has a 52-week price range of HKD 12.9 to HKD 56.7, with a current market capitalization of HKD 58.6 billion [4][9]. - The average daily trading volume over the past three months was HKD 1.3 billion [4].

Investment Rating - The report does not specify a clear investment rating for the company [1] Core Views - The company's 2023 annual report shows revenue of 17.03 billion RMB, a year-on-year increase of 11.6%, while net profit attributable to shareholders decreased by 23.1% to 3.4 billion RMB [2] - Non-COVID revenue grew by 37.7% to 16.51 billion RMB, indicating robust growth in non-COVID projects [2] - The number of new projects reached a historical high in 2023, with a total of 132 new projects added throughout the year [2] - The company's "Winning Molecules" strategy continues to drive future revenue growth, with a backlog of approximately 20.6 billion USD in unfulfilled orders [2] - The Singapore integrated CRDMO center has commenced construction, and the Irish base is expected to achieve breakeven in 2024, indicating positive capacity ramp-up [3] Summary by Sections Financial Performance - In 2023, the company achieved a revenue of 17.03 billion RMB, with a growth rate of 11.56% [4] - The net profit attributable to shareholders was 3.4 billion RMB, reflecting a decline of 23.09% [4] - The adjusted net profit was 4.7 billion RMB, down 4.6% year-on-year [2] Revenue Breakdown - COVID-related revenue was 530 million RMB, down 83.9%, while non-COVID revenue was 16.51 billion RMB, up 37.7% [2] - Revenue from preclinical, clinical early (Phase I, II), clinical III, and commercialization stages were 5.4 billion, 3.62 billion, and 7.73 billion RMB respectively, with significant growth in clinical III and commercialization [2] Project Development - The number of new projects added in 2023 was 132, with a strong recovery in the second half of the year [2] - The company aims to increase the target for new projects in 2024 from 80 to 110 [2] Capacity and Operations - The Singapore CRDMO center will provide integrated research, development, and production services, with a planned capacity of 120,000 liters [3] - The Irish base is expected to reach breakeven in 2024, with significant commercial production demand anticipated from 2025 [3] Profit Forecast - The company forecasts net profits of 3.81 billion, 4.5 billion, and 5.29 billion RMB for 2024, 2025, and 2026 respectively, with corresponding EPS of 0.90, 1.06, and 1.24 RMB [4][9]