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Wuxi Biologics (2269 HK) - Long-term uptrend remains intact

作者: Hayden Zhang,Warren DAI
时间: 2020年06月29日
重要性: 一般报告
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摘要: Report title:Wuxi Biologics (2269 HK) - Long-term uptrend remains intact
Analyst:Hayden Zhang,Warren DAI
Report type:Company
Date:20200629
[Summary]

■ Co. pocketed 15 COVID-19 projects YTD with USD80mn/150mn estimated revenue contribution in 2020E/21E, as per mgmt.
■ Mgmt. explained some projects have been affected by COVID-19 disruption, thereby postponing ~USD100mn revenues to 2021E
■ We lifted DCF-based TP from HKD144.3 to HKD169.2 to reflect its new COVID-19 projects and rising client base. Maintain BUY

Continued expansion in client base
Co. continued to add 50+ new clients during COIVD-19 pandemic in 1H20, backed by its well-built platform and global franchise. Co. reported it has pocketed 15 new projects for COVID-19 which could convert to total revenue of USD80mn/150mn in 2020E/21E. In light of rising R&D demand on COVID-19 treatment, Co. expects to add 20 additional COVID-19 projects by end-2020E, thanks to its proven shorter timeline delivery for yellow fever antibody (completion of all preclinical CMC in 7 months) and Zika virus antibody (9 months). Thus, we think current adversity also provides opportunities for Co. to win over new clients with surging COVID-19 demands during pandemic.
COVID-19 postpones revenue – outlook maintained
Co. has seen ~11 projects delayed by sponsor’s disrupted clinical trials due to COVID-19 pandemic, thereby postponing ~USD100mn revenue from milestone and commercial projects to 2021E. That said, Co. expects its new COVID-19 projects (~USD80mn worth revenue in 2020E) could largely backstop the growth in 2020E. Thus, Co. guided a ~30% yoy revenue growth in 2020E, reflecting soft 1H20E (~10% yoy growth) and rebound in 2H20E (~50% yoy). Further, with the new addition of c.USD3bn vaccine contacts in 1Q20 and steady growth in late-stage pipeline (up from 13 in 2018 to 16 in 2019), we believe such strong backlog should well underpin Co’s 21-22E growth.
Maintain BUY with DCF-based TP lifted to HKD169.2
We revised down our 20E/21E earnings forecast by 5%/5%, to reflect postponed 2020E revenue due to COVID-19 pandemic. That said, we think short-term adversity is cushioned by new COVID-19 projects while the postponed revenue and rising client base should boost its long-term growth post outbreak. Thus, we lifted DCF-based TP to HKD169.2 from HKD144.3. Maintain BUY on Co.’s leading biologic CRO franchise and growing late stage projects.

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