Zhongtai Securities: Maintain the "Buy" rating of WuXi Biologics (02269) and expect new technology platforms to gradually contribute new increments

Zhitong Finance APP learned that,Zhongtai SecuritiesReleased a research report saying that maintainingWuXi Biologics(02269) "Buy" rating, believing that the company is a scarce target in the global biopharmaceutical outsourcing service industry, with high prosperity in the industry and prominent advantages of the company. Subsequently, with the commercialization of existing projects, XDC, vaccines, double antibodies and other platforms to accelerate the realization, the long-term space is broad, and the future is promising.

Event:The company released its results for the first half of 2021, and achieved operating income of 4.41 billion yuan during the period, representing a year-on-year increase of 126.7%; Net profit attributable to the parent was 1.84 billion yuan, a year-on-year increase of 150.3%; The adjusted net profit attributable to the parent was 1.77 billion yuan, a year-on-year increase of 163%.

The main views of Zhongtai Securities are as follows:

The performance exceeded expectations, and the net profit attributable to the parent was higher than the performance forecast.

The previous performance forecast 2021H1 net profit attributable to the parent increased by 135% year-on-year, and the actual growth was 150.3%, which was higher than expected. The Bank believes that it is mainly due to:

1) The volume of late clinical and commercialization projects increased rapidly, including the clinical stage revenue of 1.94 billion yuan (+109.2% year-on-year) and the commercialization stage revenue of 889 million yuan (+2923.5%);

2) the rapid recovery of demand after the normalization of overseas epidemic, with revenue from North America of RMB2.19 billion (+149.3% year-on-year) and revenue from Europe of RMB990 million (+706.8% year-on-year) in 2021H1;

3) continuous optimization of management capabilities and continuous improvement of operational efficiency, with gross profit margin of approximately 52.1% (+11.6pp), net profit margin of approximately 41.8% (+3.9pp) and period expense ratio of approximately 12.4% (-8.2pp) in 2021H1;

4) Low base last year: In the first half of last year, the overall base was low due to the epidemic disturbance, with 740 million (+63.6%) attributable to the parent in 2020H1. However, compared with the net profit attributable to the parent in 2019H1, the company's CAGR from 2019H1 to 2021H1 was about 102.3%, with a rapid growth.

CMO's logic of heavy volume continues to be realized, and the strategy of following and winning molecules is progressing smoothly, which is expected to accelerate the growth of overall performance.

Adhering to the strategy of following and winning molecules, as of June 30, the company extended 27 projects (14 pre-clinical to clinical, 2 phase III to commercial) in the first half of the year, introduced 20 clinical projects externally (+400%, including 9 clinical phase II and 4 clinical phase III), added 79 projects, and the overall number of projects reached 408 (+42.7% year-on-year compared with 2020H1), including 212 pre-clinical (+50.4%), 160 early (phase I and phase II) projects (+28%), 32 phase III projects (+68.4%), and 4 commercial projects (three new).

In addition, due to the rapid growth of the number of projects, the company's orders in hand continue to increase rapidly. It is expected that in the next three years, the total amount of orders completed will reach 2.25 billion USD (+143.1%), and the total amount of uncompleted orders will be about 12.46 billion USD (+31.7%), of which the outstanding service orders will be 7.23 billion USD (+25.2%). It is expected that the bank will have seven commercialization projects in 2021, which is expected to promote a new round of heavy volume in the CDMO sector and accelerate the overall performance growth.

Advanced XDC, vaccine and dual antibody platforms bring new growth momentum.

XDC:The company's XDC drug R&D platform has undertaken 48 ADC projects (+60%) with the advantages of WuXiDAR4 technology, and 15 CDMO projects are already underway, and the commercialization volume can be expected;

WuxiVaccine:Nine vaccine orders are being executed (up 8 year-on-year), and the orders in hand have increased to US$3.3 billion. WuXi Haide is expected to be put into operation in 2022, which is expected to continue to bring incremental performance.

Double antibody:WuxiBody ™ Undertake 31 projects (+19.2%), and expect to add 1~2 IND applications in 2021, which is expected to extend CDMO to gradually contribute new increments.

Earnings Forecast and Investment Advice:The bank estimates that the company's revenue from 2021 to 2023 will be 9.36, 13.84 and 19.4 billion yuan, representing a year-on-year increase of 66.7%, 47.9% and 40.2%, and the net profit attributable to the parent will be 2.82, 4.17 and 5.88 billion yuan, representing a year-on-year increase of 67.1%, 47.6% and 41.2%, corresponding to EPS of 0.67, 0.98 and 1.39 yuan.

Risk warning events:The public information used in the research report may be subject to the risk of information lag or updating in a timely manner, proposed acquisitionPfizerThe risks of the progress of China's biologics production base project being less than expected, the investment in biologics research and development being less than expected, and the risk of loss of core technical personnel.