2024Q1 results are in line with our expectations
2024Q1, with revenue of 7.98 billion yuan, excluding COVID-19 commercialization projects of -1.8% year on year, net profit to mother of 1.94 billion yuan, -10.4% year on year, after deducting non-net profit of 2.03 billion yuan, +7.3% year on year; in line with our expectations.
Development trends
WuXi Chemistry's molecular pipeline continues to expand, and the new molecule business (TIDES) continues to expand. 2024Q1, WuXi Chemistry earned 5.56 billion yuan, excluding specific commercial production projects, -0.6% year-on-year, of which D&M revenue was 4.0 billion yuan, excluding specific commercial production projects, +1.2% year-on-year. 2024Q1, the company added a total of 337 molecules. As of 2024Q1, the total number of D&M molecular pipelines reached 3,286, including 64 commercialized projects, 74 clinical phase III projects, and a total of 11 commercialized and clinical phase III projects added in 2024Q1. The TIDES business continued to grow, with 2024Q1TIDES revenue reaching 780 million yuan, +43.1% year over year. As of 2024Q1, TIDES's on-hand orders were +110% year-on-year, maintaining strong growth. In January 2024, the volume of the peptide solid phase synthesis reactor was increased to 32,000 L.
Maintaining a leading position in drug safety evaluation and SMO. 2024Q1, WuXi Testing's revenue was 1.49 billion yuan.
Revenue from laboratory analysis and testing services was RMB 1.05 billion, -0.6% YoY. Among them, the revenue from the drug safety evaluation business was +3.7% year-on-year, maintaining the leading position in the Asia-Pacific industry. Clinical CRO and SMO revenue was $440 million, +11.0% YoY. Among them, the SMO business was +26.4% year-on-year, maintaining the leading position in the Chinese industry. 2024Q1, the company's SMO enabled customers to be approved for the launch of 10 new drug products, and continued to increase market share in various treatment fields.
We look forward to the expansion of CTDMO commercialization projects for high-end treatment. With 2024Q1, the company added the world's first innovative tumor lymphocyte therapy (TIL) commercialization project for an American customer. According to the announcement, the company is preparing a BLA declaration for LVV production of a commercial CAR-T product. Post-PPQ production has begun, and the company is expected to report to the FDA in the second half of 2024. In addition, the company is preparing a BLA declaration for the production of a major commercial CAR-T product. The company expects to complete process verification and submit to the FDA in the second half of 2024.
Profit forecasting and valuation
The profit forecast for 2024 and 2025 remains unchanged. The current A share price corresponds to the 2024/2025 price-earnings ratio of 12.8 times/11.8 times. The current H share price corresponds to the 2024/2025 price-earnings ratio of 9.2 times/8.2 times. A/H shares maintained an outperforming industry rating, but due to increased market concerns about geopolitical risks, we lowered our target price of A shares by 18.7% to 54.50 yuan, corresponding 15.9 times the 2024 price-earnings ratio and 14.8 times the 2025 price-earnings ratio. There is 24.8% upside compared to the current stock price. We lowered our target price for H shares by 17.2% to HK$44.30, corresponding to 11.5 times the 2024 price-earnings ratio and 10.2 times the 2025 price-earnings ratio. There is 25.0% upside compared to the current stock price.
risks
Geopolitics, exchange rate fluctuations, capacity utilization falling short of expectations, orders falling short of expectations, new business development.