Best effort to ensure business continuity

（以下内容从招银国际《Best effort to ensure business continuity》研报附件原文摘录）
药明康德(603259)
WuXi AppTec reported revenue of RMB40.3bn in 2023, up 2.5% YoY,attributable recurring net income of RMB9.7bn, up 16.8% YoY, and attributableadjusted non-IFRS net income of RMB10.9bn, up 15.5% YoY. Revenue was inline with Bloomberg consensus while attributable adjusted non-IFRS net incomebeat the consensus by 6.3%. Excluding revenue from the COVID-19 commercialproject, the Company delivered impressive revenue growth of 25.6% YoY in2023, despite the challenging environment in global CXO industry. For 2024E,management expected the reported revenue of WuXi AppTec to fall in the rangeof RMB38.3-40.5bn, representing a decline of 5.1% YoY to growth of 0.4% YoY.Excluding revenues from commercial projects related to COVID-19, the revenueis expected to rise by 2.7% to 8.6% YoY. Furthermore, management anticipatesthe adjusted non-IFRS net income margin will remain approximately on par withthe 2023 level, thanks to the company's ongoing efforts to enhance operationalefficiency, new capacity coming online, and the impact of FX fluctuations.
Solid business development in 2023. With a solid phase synthesizercapacity of 32k L for peptide production, TIDES revenue remarkably grewby 64.4% YoY in 2023, on top of 337% YoY growth in 2022. Notably,backlog of TIDES as of Dec 2023 dramatically increased by 226% YoY.Drug safety assessment and SMO business experienced revenue growth of27.3% and 26.1% YoY, further solidifying the leading positions in theirrespective markets. ATU is working on two commercial projects and isadvancing another two potential commercial projects. Starting to receiveroyalty income in 2023, DDSU obtained NMPA approvals for three newdrugs developed for its customers with another two in NDA review stage.
WuXi AppTec is actively cooperating with its customers to ensurebusiness continuity. The management of WuXi AppTec has reaffirmedtheir position, stressing that the company is not involved in the humangenomics sector and maintains no ties with any political entities,governments, or military organizations, thereby not posing national securitythreats to any nation. The management also emphasized that WuXiAppTec's client relationships remain robust, evidenced by severalcustomers entering into discussions for long-term contracts for theiradvanced-stage projects. These negotiations are made possible by theutilization of the "Grandfather Clause" incorporated in a revised draft billbrought before the US Senate.
Share buyback to show confidence in the Company. WuXi AppTec hasalready cancelled RMB1.2bn H-shares under its 2023 H-share AwardScheme. Following the completion of RMB1bn A-share repurchase in Feb2023, the Company is in progress to repurchase another RMB1bn A-share.
Maintain BUY. To factor in the uncertainties from geopolitical risks, we cutour TP from RMB116.01 to RMB67.53 (based on a 10-year DCF model withWACC of 10.73% and terminal growth of 2.0%). We forecast revenue togrow by -3.0%/ +10.3%/ +11.1% YoY and adjusted non-IFRS net income togrow by -5.5%/ +10.8%/ +12.9% YoY in 2024E/ 25E/ 26E, respectively.