Business Summary:

Wuxi Apptec (stock code: 2359.HK), a Hong Kong-listed company, provides

research and manufacturing services throughout the discovery, development and manufacturing spectrum for small molecules drugs, cell therapies and gene therapies as well as providing testing services for medical services.

Business Summary and Prospect:

For the twelve months ended December 2020, the revenue rose 28.5% year on year to RMB 16,535.4 million. The increase was owing to the contribution from her China-based laboratory services and CDMO (Contract Development and Manufacturing Organization) services. The net profits amounted to RMB 2,960.2 million, representing an increase of 59.6% over the same period of last year.

Earning per share was RMB 1.27. (2019: RMB 0.81); increased by 56.8%.  Gross profit margin achieved 37.8%; compared with 38.9% in the previous year. Dividend per share was RMB 0.363  (2019: RMB 0.337).

The group offered services to active customer of more than 4,200, with over 1,300 new customers adding during the reporting period. China-based laboratory services realized revenue of RMB8,545.8 M,  representing a YoY growth of 32.0%; while CDMO services realized revenue of RMB 5,282.1M, representing a YoY growth of 40.8%.

In January 2020, the group started the construction of a new drug product development and production facility in STA Wuxi site. Also, plasmid manufacturing facility was expanded in Wuxi City, providing integrated services from bacteria banking, process development, research manufacturing, and commercial manufacturing to her global customers

Risk:

Firstly, Wuxi Apptec ranks one of the highest P/E (ratio: 143) and  P/B (ratio:13.6); just behind her mother company Wusi Apptec (stock code: #2269) having P/E ratio: 236.7 & P/B ratio: 20.2.   Secondly, risk of declining demand may occur in healthcare biotechnology / pharmaceutical R&D services market.  Thirdly, there may be risk of losing scientific and technological talents and senior management members; and risks regarding intellectual property protection

Technical Analysis:

The stock prices hit historic high of $196.9 on 16 Jul, 2021.   It is suggested to buy at the price around $168. The target price for medium term is $205. Cut-loss price will be $155.

References

www.hkex.com.hk

www.etnet.com.hk

www.afe-solutions.com

I, Gary Tam, am a licensed person under the Securities and Futures Commission. Until the date this commentary was published, neither I and/or my affiliates are the beneficiary of the securities mentioned herein or are entitled to any financial interests in relation thereto.