1Q24 revenue and profit were steady, maintaining a buy rating
The company released its quarterly report for the year 24 on 4/29, achieving revenue of 7.98 billion yuan (-11.0% yoy), net profit of 1.94 billion yuan (-10.4% yoy), deducting non-net profit of 2.03 billion yuan (+7.3% yoy), adjusted non-IFRS net profit of 1.91 billion yuan (-18.3% yoy). The main reason for the decline in 1Q24 revenue was that 1Q23 contributed revenue from large COVID-19 orders. The base figure was high (after deducting large orders, 1Q24 regular business revenue -1.6% yoy), after deducting non-growth rate deviated from the mother The growth rate was mainly due to 1Q24's confirmation of fair value change profit and loss other than hedging and disposal profit and loss of $182 million (vs. 1Q23 million yuan). We expect regular business revenue to grow 2.7-8.6% in 24, but at the same time, considering the continuous improvement of the company's operating efficiency, maintaining the company's net profit of 99.96/133.00/16.883 billion yuan from 24-26, the target price for A/H shares is 82.82 yuan/85.94 HKD (previous value: 82.16/HK$77.11) under the segmental valuation method.
WuXi Chemistry: Regular business is steady, TIDES business opens the second growth curve 1Q24 WuXi Chemistry's actual revenue of 5.563 billion yuan (-13.53% yoy, minus COVID-19 revenue -0.6% yoy), adjusted non-IFRS gross profit margin of 43.3% (-1.6pp yoy), of which CDMO is 4.0 billion yuan (minus COVID-19 +1.2% yoy). We believe that the sector's revenue is expected to remain flat in 24, mainly due to 1) building the CRDMO platform, adding 11 new phase 3 clinical and commercial projects in 1Q24; 2) strengthening capacity building for new molecules: 1Q24's New Molecule Business (TIDES) revenue of 780 million yuan (43.1% yoy), +110% yoy in on-hand orders, 146 customers (+30% yoy), and 276 services (+43% yoy). With the new production capacity of 1M24 Changzhou and Taixing sites being put into use, the volume of the peptide solid phase synthesis reactor increased from 20,000 liters to 32,000 liters. We expect TIDES revenue to maintain high growth in 24 years.
Growth cornerstone: WuXi Testing, WuXi Biology, WuXi ATU1) WuXi Testing: 1Q24 achieved revenue of 1,491 billion yuan, +2.60% yoy, adjusted non-IFRS gross profit margin of 35.6% (-0.7pp yoy), we expect revenue to remain stable in 24 years; 2) WuXi: Biology
1Q24 revenue of 561 million yuan, -2.81% yoy, adjusted non-IFRS gross profit margin of 38.5% (-3.0 ppyoy), increased share of new molecule business (share of new molecule business: 29.2% in 1Q24 vs 27.5% in '23 vs 22.5% in '22 vs 14.6% in '21), we expect sector revenue to be basically stable in '24; 3) 1Q24 achieved revenue of $280 million, -13.63% yoy, adjusted non-IFRS gross margin- 32.8%. The main reason for the low gross profit is that the high-margin project was completed in '23; in addition, the 2M24 commercialization project was approved, and the company reserves production and quality control personnel in advance. We expect the sector's revenue to increase steadily throughout the year.
2024 H Share Incentive Trust Plan to Unlock Intrinsic Value
On the same day, the company announced the 2024 H share reward trust plan. The core content: 1) Reward pool: no more than HK$2 billion; 2) Grant conditions: 24-year revenue of 38.3 billion yuan (basic grant conditions) and 24-year revenue of 40.5 billion yuan (additional grant conditions). If only basic grant conditions are met, up to half of the plan's upper limit can be used to grant rewards; 3) Vesting period: four installments (25% each period), which will be implemented before the end of 28 years; 4) Scope of rewards: extensive incentives, including mid-level, technical backbone, etc.
Risk warning: Overseas epidemics continue, market competition intensifies, and it is impossible to protect one's own intellectual property rights.