King & Capital | China Thai International's research report pointed out that in the first three quarters, WuXi AppTec (02359) revenue decreased by 6.2% year-on-year to 27.7 billion yuan (RMB, the same below), but after excluding revenue from new coronavirus projects in 2023, revenue increased by 4.6% year-on-year. Shareholders' net income in the first three quarters decreased by 19.1% year-on-year to 6.53 billion yuan, reflecting a 10.1% non-IFRS adjusted net income decline to 6.68 billion yuan year-on-year, both narrowing the decline compared to the first half of the year. The situation of the third quarter's main business, the chemical business (accounting for over 70% of the company's revenue), has improved, slightly exceeding expectations. Excluding the impact of new coronavirus project revenue, chemical business revenue increased by 10.4% year-on-year, leading the performance to rebound.
The bank stated that regarding the US Biologics Bill that the market is concerned about, the company mentioned that due to differences in the versions of the bill between the House and the Senate, it will still need to be negotiated by both houses before being submitted for approval by the US President. The likelihood of it being introduced within the year is low at present. Despite this, as the bills from both the House and the Senate have been passed by large margins, uncertainty remains, and the bank will continue to monitor progress.
The bank further indicated that based on the situation in the first three quarters of 2024, the bank has raised revenue forecasts for 2024-26E by 2.8%, 2.3%, and 2.8% respectively. Shareholders' net income forecasts have been raised by 5.0%, 5.9%, and 5.3% respectively. Non-IFRS adjusted net income has been revised up by 5.1%, 5.9%, and 5.3%. Taking into account the improved situation in the Hong Kong stock market, the bank lowered the risk premium assumption in the DCF model while incorporating forecasts for 2034, raising the target price to 48.00 Hong Kong dollars. Nevertheless, with US business revenue accounting for 63.6% of revenue in the first three quarters, future fluctuations in the stock price due to the US Biologics Bill could still occur, maintaining a "neutral" rating.
