WuXi AppTec reported 3Q24 revenue of RMB10.46bn, slightly down 2.0% YoY, and attributable adjusted non-IFRS net profit of RMB2.97bn, down 3.2% YoY. Total non-COVID revenue and non-COVID Chemistry revenue growth rebounded to 14.6% YoY and 26.4% YoY, respectively, in 3Q24. Despite the challenging geopolitical environment, mgmt. reiterated its revenue guidance of RMB38.3- 40.5bn for 2024, indicating 2.7%~8.6% YoY non-COVID revenue growth. Additionally, mgmt. reiterated its commitment to maintaining an adjusted non- IFRS net profit margin consistent with the levels achieved in 2023.
Strong global competitiveness led to fast order growth. As of 3Q24, WuXi AppTec's backlog climbed to RMB43.82bn, representing a YoY increase of 35.3%, maintaining the encouraging momentum of 33.2% YoY growth (excluding COVID-19 commercial projects) in 1H24. The rapid backlog growth signified the enduring trust that global clients place in WuXi AppTec's high-quality and efficient services. This is further evidenced by a robust 23.1% YoY rise in revenues from global Top 20 pharmaceutical companies in 9M24, a notable acceleration from the 11.9% growth observed in 1H24. Management has indicated that 80% of the backlog is expected to convert into revenue within the next 12 to 18 months, providing strong earnings visibility for WuXi AppTec in 4Q24 and throughout 2025, in our view.
TIDES continues to exhibit strong growth. TIDES revenue grew by 71.0% YoY in 9M24, with the growth accelerating to 98.6% YoY in 3Q24. The TIDES backlog as of 3Q24 saw a substantial YoY increase of 196%. In Jan 2024, WuXi AppTec expanded its peptide production capacity from 10k liters to 32k liters, with plans to expand to 41k liters by the end of 2024 and further to 100k liters by 2025. This ambitious expansion underscores WuXi AppTec's commitment to meeting the rapidly growing global demand for peptide services, positioning TIDES as the strongest growth driver for the Company through 2026.
Overseas peers struggle to compete with Chinese chemical CDMOs in the medium term. In our in-depth report published on 21 Oct 2024, we analyzed the business fundamentals of 30 companies from Europe, the US, and India engaged in API and chemical CDMO services. The findings reveal that these companies significantly trail WuXi AppTec in terms of business scale and capacity. Specifically, most Indian peers primarily offer bulk and specialty APIs, with limited capabilities in supporting innovative drugs R&D. Meanwhile, European firms, despite having an established pharmaceutical manufacturing base with several well-known chemical CDMOs, tend to focus more on formulation instead of API. Their manufacturing sites, primarily located in Central and Western Europe, face higher labor costs compared to WuXi AppTec, further disadvantaging them in the competitive market.
Maintain BUY. Factoring in the positive trend of customer demand, we lift our TP from RMB67.72 to RMB72.37 (based on a 10-year DCF model with WACC of 9.42% and terminal growth of 2.0%). We forecast revenue to grow by -3.6%/ +11.4%/ +13.6% YoY and adjusted non-IFRS net income to grow by -3.9%/ +11.9%/ +15.5% YoY in 2024E/ 25E/ 26E, respectively.
