Investment Rating - The report maintains a "Neutral" rating for WuXi Biologics (2269 HK) with a target price adjusted to HKD 10.20 from HKD 13.00 [2][4][11]. Core Views - The company's performance in the first half of 2024 was below expectations, with revenue increasing by only 1.0% year-on-year to RMB 8.57 billion. Excluding COVID-related projects, revenue growth was 7.7%. Shareholder net profit decreased by 33.9% to RMB 1.50 billion, reflecting a 20.7% decline in adjusted net profit to RMB 2.25 billion [1][2]. - The report highlights challenges in the domestic market, with revenue from China declining by 20.9% to RMB 1.42 billion. The absence of significant prepayment transactions, which contributed approximately RMB 300 million in gross profit in the previous year, further impacted profitability [1][2]. - The report anticipates continued challenges in the short term, leading to downward adjustments in revenue and profit forecasts for 2024-2026. Revenue estimates were reduced by 2.9%, 9.8%, and 12.9%, while shareholder net profit forecasts were cut by 14.6%, 18.4%, and 20.8% for the same periods [2][3]. Summary by Sections Financial Performance - For the first half of 2024, total revenue was RMB 8.57 billion, with a 1.0% year-on-year increase. Adjusted net profit was RMB 2.25 billion, down 20.7% year-on-year [1]. - The company signed 61 new projects in the first half, with 52 being lower-fee preclinical projects, indicating a slower revenue recovery [2][3]. Revenue and Profit Forecasts - Revenue forecasts for 2024, 2025, and 2026 have been adjusted to RMB 17.448 billion, RMB 19.320 billion, and RMB 21.230 billion, respectively, reflecting a downward adjustment of 2.9%, 9.8%, and 12.9% [3][7]. - Shareholder net profit forecasts for the same years are now RMB 3.132 billion, RMB 4.005 billion, and RMB 4.617 billion, with reductions of 14.6%, 18.4%, and 20.8% [3][7]. Market Conditions - The report notes that the recovery of the Chinese market is slower than expected, with significant challenges in financing for the healthcare sector affecting demand for research outsourcing services [2][3]. - The U.S. market, which accounted for 58.4% of revenue in the first half, is also under scrutiny due to potential impacts from the U.S. Biologics Safety Act [2][3].
药明生物：上半年业绩逊预期，短期内仍面对挑战