FY23 exceeded expectations, and FY24 is expected to maintain rapid growth: 2023 revenue +114.4%, net profit/adjusted net profit +82.1%/112.1%, respectively, all surpassing previous earnings. Gross margin and adjusted net margin were 26.3%/19.4%, respectively, which was generally stable year over year. Pre-IND service revenue accounted for 43.6% (+5.1 percentage points), and post-IND service revenue accounted for 56.4%. Non-ADC projects increased their share of revenue to 11.1% (vs. 7.6% in 2022). By the end of 2023, the company had 143 ongoing comprehensive projects (vs. 94 at the end of 2022), including 122 pre-clinical & phase I projects, 21 phase II/III projects (including 5 PPQ projects to be declared for BLA); 129 comprehensive ADC projects and 14 non-ADC integrated projects; and the total number of outstanding orders was US$580 million, +81.9% YoY. The company signed 50 new comprehensive projects throughout the year, including 42 pre-clinical and 8 clinical-stage projects, and promoted 36 projects from discovery to the CMC stage. In the future, it can support 40 IND project declarations every year. 2024 guidance: Revenue of at least $3.1 billion (or at least 46% increase, of which unfinished orders at the end of last year can already support more than 60% of the guideline), steady increase in gross margin, and capital expenditure of $1.55 billion.
Simultaneous expansion of domestic and overseas production capacity: The Wuxi base launched a dual-function production line xMAB/xBcm2 and a kilogram connector/payload facility xPLM1 in 2H23. This year, a dual-function DS production line (mAb intermediates and biocoupling, expected to be launched on 2H24) and a DP production line (1H25 launch) will be added. The Singapore base officially broke ground last week. It is expected to go online in 2026. After completion, it will have a production capacity of 2,000 L of antibody intermediates and a production capacity of 2,000 L of conjugated DS. Of the 2024 capital expenditure budget of 1.55 billion yuan, 650 million and 900 million were spent on the construction of the bases in Wuxi and Singapore, respectively.
Evolution from WuxiDar4 to WuxiDarX: Building on WuxiDar4's proprietary technology, the company's WuxiDarX technology can further meet the DAR value requirements of more ADC molecules (2 and 6).
WuxiDarx can achieve 65% of specific DAR types in ADC products (which can be further increased to 95% or more through additional polishing steps), and there is no need for additional modifications to the DNA and protein/antibody provided by the customer, bringing great technical convenience to the transfer of CMC and amplification technology.
Maintaining the target price: We kept our 2024-25E revenue forecast unchanged and raised our adjusted net profit forecast by 2-3% to 780 million/1.17 billion yuan based on gradually improved profit margin forecasts. Our latest revenue/adjusted net profit forecasts correspond to 47%/60% 2023-26E CAGR, respectively. We maintain the DCF list price of HK$42.0, corresponding to 67x 2024E P/E and 0.7x 2024E PEG. Considering the continued growth of the company's large orders in the later stages and the certainty of fulfilling high performance growth expectations, the current stock price is still significantly undervalued (potential increase of 152.7% over the next 12 months), and we maintain our buy rating.