Non-COVID business to maintain solid growth

（以下内容从招银国际《Non-COVID business to maintain solid growth》研报附件原文摘录）
药明康德(603259)
Strong earnings growth in 2022. WuXi AppTec reported 2022 revenue ofRMB39.4bn, up 72% YoY, attributable recurring net income of RMB8.3bn, up 103% YoY, and attributable adjusted non-IFRS net income of RMB9.4bn, up 83% YoY. The Company delivered resilient growth despite COVID-19 impacts through 2022, with revenue increasing by 71%/ 66%/ 78%/ 72% YoY for 1Q/ 2Q/ 3Q/ 4Q, respectively. Considering the high revenue base of 2022, management guidedpositive revenue growth of 5-7% YoY for 2023E, and reiterated its revenue CAGR target of over 34% in 2021-24E. Specifically for 2023E, management expected revenue of WuXi Chemistry, excluding the commercial-stage COVID-19 project, to maintain a solid growth momentum at 36-38% YoY, the combined revenue of WuXi Testing, WuXi Biology, and WuXi ATU to increase by 20-23% YoY and revenue of DDSU to decline more than 20% due to proactive pipeline adjustment to meet the changing R&D needs of Chinese clients.
Non-COVID projects to fuel sustainable growth. WuXi Chemistry’s revenue increased by 105% YoY in 2022, mainly driven by the 173% YoY revenue growth from its chemical CDMO services. Excluding commercial-stage COVID-19 projects, WuXi Chemistry segment delivered impressive growth of 40% YoY in 2022. Based on our rough estimates, revenue from the COVID-19 projectscould account for ~20% of WuXi AppTec’s total revenue in 2022. We think the solid growth of WuXi AppTec’s business reflected the robust demand from the Company’s extensive and balanced client base amid the temporarily challenging financing environment.
Years’ of investment turning new modalities services into new drivers.Revenue of new modalities-related services (TIDES, mainly including oligo and peptides) jumped by 158% YoY in 2022 to RMB2.0bn, represented ~16% of chemical CDMO revenue (excluding the commercial-stage COVID-19 projects). Moreover, revenue from new modalities within WuXi Biology segment experienced strong YoY growth of 90%, contributing 22.5% of segment revenue in 2022 (vs 14.6% in 2021). The Company has built the largest drug discovery team in the world, functioning as a critical project source for its downstream services, such as CDMO and clinical CRO. More synergies among its various business segments are yet to be released.
Consistent globalization efforts. WuXi AppTec spent RMB10.0bn in Capex in 2022 and plans to invest RMB8-9bn in 2023E to further enhance its global network. In overseas market, the Company is constructing large-scale drug product manufacturing facilities in the US as well as full-suite R&D and manufacturing sites in Singapore with a total investment of US$1.4bn in next 10 years. Its fast-growing global network will enable the Company to better meet the growing and diversified client demand in the ever-changing market.
Maintain BUY. Our TP of RMB121.52 is based on a 10-year DCF model with WACC of 11.57% and terminal growth of 3.0%. We forecast WuXi AppTec’s revenue to grow by 6.9%/ 30.9%/ 26.6% YoY and adjusted non-IFRS net income to grow by 13.5%/ 31.2%/ 25.8% YoY in 2023E/ 24E/ 25E, respectively.