Impressive margin improvement in 1H23_股票频道

（以下内容从招银国际《Impressive margin improvement in 1H23》研报附件原文摘录）
药明康德(603259)
WuXi AppTec reported 1H23 revenue of RMB18,871mn, up 6.3% YoY, andattributable recurring net income of RMB4,761mn, up 23.7% YoY, with attributableadjusted non-IFRS net income of RMB5,095mn, up 18.5% YoY. 1H23 revenue /adjusted Non-IFRS net income accounted for 45-52% of both our full-year estimatesand consensus estimates, which also fell in its average historical range. Non-IFRSgross profit margin (GPM) improved by 3.4ppt to 41.6% while non-IFRS net profitmargin increased by 2.8ppt to 27.0% in 1H23, driven by favourable currencyexchange rates and continuously improved operating efficiency. Excludingcommercial COVID-19 projects, overall backlog increased by 25% YoY. Despite thehigh base of 2022, Management reiterated revenue growth target of 5-7% YoY whileslightly raised non-IFRS gross profit growth target to 13-14% YoY (from 12-14% YoY)in 2023E, indicating management’s confidence in the Company of navigating throughthe tough macro environment.
Non-COVID projects to firmly fuel sustainable growth. Supported by stronggrowth of D&M services, non-COVID revenue growth of WuXi Chemistrysegment accelerated quarter-by-quarter in 1H23 with +51.6% YoY in 2Q23 vs+21.8% YoY in 1Q23 (both excluding commercial COVID-19 projects).Management expected COVID revenue of ~RMB3.0bn in 2023E with~RMB1.5bn already recognized in 1H23. We think the strong growth of nonCOVID revenue reflected the robust demand from the Company’s extensive andbalanced client base amid the temporarily challenging financing environment inglobal pharmaceutical industry.
Benefiting from strong demand growth for new modalities services.Revenue from TIDES (mainly oligo and peptides) in WuXi Chemistry segmentgrew by 37.9% YoY in 1H23, on top of a 337% YoY growth in 2022. Backlog ofTIDES dramatically increased by 188% YoY in 1H23, while Managementexpected over 70% YoY growth of TIDES revenue in 2023E. We expectmeaningful future revenue from the CMO services for a blockbuster dual-targetedGLP-1 product. We are positive on the Company’s competency in the globalpeptide market to capture the increasing weight-loss market opportunity, basedon its established capacities (over 10,000 liter peptide solid-phase synthesizersas of Feb 2023) and R&D capabilities (1,000 staff as of Feb 2023).
Margin improvement driven by favourable currency exchange rates andoperating efficiency improvement. Management indicated that the GPMimprovement of 3.4ppt in 1H23 was mainly attributed to favourable currencyexchange rate (2.4ppt) and increasing operation efficiency (1.0ppt). If no majorchange in foreign exchange in 2H23E, GPM could be maintained at above 40%for 2023E, according to Management. The Company is also optimizing employeeoutput by implementing big data and automation in services.
Maintain BUY. We revised our TP from RMB110.69 to RMB 116.73, based on a10-year DCF model with WACC of 11.57% and terminal growth of 3.0%. Weforecast WuXi AppTec’s revenue to grow by 6.1%/ 28.8%/ 25.8% YoY andadjusted non-IFRS net income to grow by 12.5%/ 24.8%/ 23.2% YoY in 2023E/24E/ 25E, respectively.