Zhongyin International released a research report, stating that the US House of Representatives voted in favor of the Biosafety Bill on September 9. Currently, even if the bill is passed, it may only affect a small number of government-funded projects, and the US business of Wuxi AppTec (02359/603259CH) is expected to remain stable. Based on the company's rapidly growing order backlog, the bank believes that the company's profitability is expected to recover. The bank's analysis shows that the current stock price may have reflected extremely pessimistic expectations for the US business, and it is bullish on valuation rebound.
The bank pointed out that customer demand is expected to gradually improve. Wuxi AppTec has seen positive signals of improving customer demand. As of June, the company's order backlog reached 43.1 billion yuan, with a year-on-year growth of 33.2% excluding the commercialization of COVID-19 projects, and the growth of new signed orders in 1H24 is about 25%. In addition, the bank expects that the US interest rate cut will drive the recovery of global biomedical investment and financing, as well as the company's order growth.
The bank raised the A-share target price to 61.89 RMB (WACC: 9.42%, perpetual growth rate: 2.0%; previous value: 54.27 RMB), to reflect the reduced uncertainty of the bill and the performance recovery brought by the growth of the order backlog. The bank expects that the company's revenue will increase by -4.4%/+10.9%/+13.2% year-on-year in 2024E/25E/26E, and the adjusted non-IFRS net income will increase by -8.4%/+11.5%/+14.4% year-on-year, corresponding to the adjusted PE ratios of 11.3x/10.1x/8.8x at the current stage.
