Events:The company released its results for the first half of 2021, achieving operating revenue of 4.41 billion yuan, a year-on-year increase of 126.7%; Net profit attributable to the parent company was 1.84 billion yuan, a year-on-year increase of 150.3%; Adjusted net profit attributable to the parent company was RMB 1.77 billion, an increase of 163% year-on-year.
Zhongtai Securities' main views are as follows:
The performance exceeded expectations, with net profit attributable to the parent company exceeding the earnings forecast.
The previous earnings forecast for the first half of 2021 showed a year-on-year increase of 135% in net profit attributable to the parent company, with an actual increase of 150.3%, exceeding expectations. The bank believes that the main reasons are:
1) Late-stage clinical and commercial projects are rapidly increasing in volume, of which clinical stage revenue is 1.94 billion yuan (+109.2% year-on-year), and commercial stage revenue is 889 million yuan (+2923.5%);
2) Demand recovered rapidly after the normalization of the overseas pandemic, with North American revenue reaching RMB 2.19 billion (+149.3% year-on-year) and European revenue reaching RMB 990 million (+706.8% year-on-year) in the first half of 2021;
3) Management capabilities continued to be optimized and operational efficiency continued to improve. In the first half of 2021, the gross profit margin was approximately 52.1% (+11.6pp), the net profit margin was approximately 41.8% (+3.9pp), and the period expense ratio was approximately 12.4% (-8.2pp).
4) Low base last year: In the first half of last year, the overall base was low due to the disruption of the epidemic. In the first half of 2020, the net profit attributable to the parent company was 740 million yuan (+63.6%). However, compared with the net profit attributable to the parent company in the first half of 2019, the company's CAGR from the first half of 2019 to the first half of 2021 was about 102.3%, showing rapid growth.
The CMO's volume growth logic continues to materialize, and the follow-and-win molecular strategy is progressing smoothly, which is expected to drive accelerated overall performance growth.
Adhering to a molecular strategy of following and winning, as of June 30, the company extended 27 projects in the first half of the year (14 preclinical to clinical and 2 Phase III to commercialization), introduced 20 clinical projects from outside (+400%, including 9 Phase II clinical projects and 4 Phase III clinical projects), and added 79 new projects, bringing the total number of projects to 408 (+42.7% year-on-year compared to H1 2020), including 212 preclinical projects (+50.4%), 160 early-stage (Phase I and II) projects (+28%), 32 Phase III projects (+68.4%), and 4 commercialized projects (three new projects).
In addition, due to the rapid growth in the number of projects, the company's order backlog continues to grow rapidly. It is expected that the total order value will reach US$2.25 billion (+143.1%) in the next three years, while the total unfulfilled order value will be approximately US$12.46 billion (+31.7%), of which US$7.23 billion (+25.2%) will be unfulfilled service orders. The bank expects seven commercial projects to be launched in 2021, which is expected to drive a new round of volume growth in the CDMO sector and accelerate overall performance growth.
Advanced XDC, vaccine, and bispecific antibody platforms are bringing new growth momentum.
XDC:The company's XDC drug development platform has undertaken 48 ADC projects (+60%) with the advantages of WuXiDAR4 technology, and 15 CDMO projects are already underway, and commercialization is expected to increase.
WuxiVaccine:Nine vaccine orders are in progress (an increase of eight year-on-year), bringing the order backlog to $3.3 billion. WuXi Hyde is expected to begin operations in 2022, which is expected to continue to drive revenue growth.
Bispecific antibodies:WuxiBody ™ We undertook 31 projects (+19.2%), and expect to receive 1-2 new IND applications in 2021, which is expected to gradually contribute to new growth by extending CDMO.
Earnings Forecast and Investment Recommendations:The bank expects the company's revenue to be RMB 9.36 billion, RMB 13.84 billion, and RMB 19.4 billion in 2021, 2021, and 2023, respectively, representing year-on-year increases of 66.7%, 47.9%, and 40.2%, and net profit attributable to the parent company to be RMB 2.82 billion, RMB 4.17 billion, and RMB 5.88 billion, respectively, representing year-on-year increases of 67.1%, 47.6%, and 41.2%, respectively, corresponding to EPS of RMB 0.67, RMB 0.98, and RMB 1.39.
Risk Warning Event:The publicly available information used in the research report may be outdated or untimely, and the proposed acquisition...PfizerRisks include slower-than-expected progress in China's biopharmaceutical production base projects, lower-than-expected investment in biopharmaceutical R&D, and the loss of core technical personnel.