2025-08-21 04:44Summary of WuXi Biologics Earnings Review Company Overview - Company: WuXi Biologics (2269.HK) - Market Cap: HK$130.4 billion / $16.7 billion - Current Price: HK$30.62 - 12-Month Price Target: HK$29.30 - Downside: 4.3% from current price Financial Performance - 1H25 Revenue: Rmb9.95 billion, up 16.1% year-over-year (y/y), or 9% y/y excluding XDC [1] - Net Profit: Rmb2.34 billion, up 56% y/y; adjusted non-IFRS net profit increased by 12% y/y [1] - Gross Margin: Expanded by 3.6 percentage points y/y to 42.7%, attributed to reduced share-based employee incentives and improved capacity utilization [1] - SG&A Ratio: Stable at 10.6%, compared to 11.6% in 1H24 [1] - 3-Year Service Backlog: Grew to US$4.21 billion, up 15.3% from 2H24, exceeding expectations [1][2] Revenue Guidance and Projections - FY25 Revenue Guidance: Raised to 14-16% y/y from previous 12-15% y/y, implying 19-21% growth for continuing operations [1] - Long-term Gross Margin Target: Management aims for a gross margin of 50% [1] - Singapore Site Gross Margin Expectation: Anticipated to reach ~45% due to large-scale capacity and advanced technologies [1] Project and Backlog Insights - Total Backlog: Increased to US$20.3 billion from US$18.5 billion at YE24 [2] - Client Retention: Over 90% retention in the R segment and more than 95% D-to-M conversion [2] - New Projects: 86 new projects signed in 1H25, with 25 PPQs scheduled for FY25, primarily in bi/multi-specific antibodies and ADCs [2][16] New Revenue Streams - Milestone Backlog: Increased to US$9.0 billion, with potential sales royalties and cell line royalties expected to contribute significantly to profits in the long term [17] - IP-based Income Potential: Could contribute 30% of profit in 5-6 years, driven by royalties and milestone payments [17] Capital Expenditure and Expansion Plans - FY25 Capex Guidance: Lowered to Rmb5.3 billion from Rmb6 billion, with significant allocation for biologics capacity expansion [18] - Global Expansion Progress: Notable advancements in manufacturing sites in Ireland, the U.S., and Singapore [18] Risks and Valuation - Valuation Adjustments: EPS estimates for 2025-2027 adjusted upwards by 15.9%, 11.9%, and 13.5% respectively due to better-than-expected margin improvements [20] - Key Risks: Legislative outcomes affecting revenue, cooling biotech funding, and increasing competition [20] Conclusion WuXi Biologics demonstrates strong financial performance with significant growth in revenue and backlog, alongside strategic plans for expansion and new revenue streams. However, potential risks from legislative changes and market competition remain critical considerations for investors.