药明生物(02269.HK)：Positive profit alert： Strong execution made the year

机构：招商证券

评级：BUY

目标价：64.2港币

Positive profit alert: Strong execution made the year

Company’s 2017 GAAP earnings beat consensus by 12-15% on strong revenue growth and margin expansion, which in turn reflected the strong franchise value in its integrated biologics enabling platform

We revised up 2017 adj NP by 3% but kept 18E/19E estimates unchanged, primarily on the currency headwind from the USD depreciation, as its USD-denominated backlog should continue to contribute the majority of revenue

That said, Company has started currency hedging; we remain convinced of mgmt.’s execution capabilities, and upgraded TP to HK$64.2 reflecting 1.5x PEG; reiterate BUY

Positive profit alert showed a strong beat on consensus

Company released a positive profit alert, confirming that its FY17 net profit could reach RMB247mn-RMB254mn, up 75%-80% YoY, on strong revenue growth and efficiency gains. Excluding the one-off forex conversion loss related to the IPO proceeds, we believe that the GAAP NP should represent some 12-15% beat on consensus GAAP NP. We further calculate that the non-GAAP net profit should be RMB400mn-410mn, representing a quite significant beat on consensus’s earnings and some 3-5% beat on our adjusted NP.

Our 2018/19E EPS unchanged on potential forex headwind

Despite the earnings beat in 17E, we refrained from upgrading 2018/19E EPS now, which mainly reflects our cautious stance on the operational effect from Forex. We estimate that if USD/RMB exchange rate stays where it is today for the rest of 2018, our 2018 revenue/EBIT estimates would be affected by c.-5%/-12%, other things being equal. That said, we understand that management has already started currency hedging to mitigate the risk.

TP revised up to HK$64.2

Meanwhile, Wuxi Bio’s delivery of strong financial results in 2017 made us more convinced of the quality in its biotech enabling platform. Our new TP is based on 1.5x PEG (from 1x before) with 2018-20E EPS CAGR of 70%. This is driven by 1) positive pipeline updates in several of its late stage customers from 2H17 (Amicus, Momenta, etc.); 2) the potentially easing HK listing rules that should allow many Chinese biotech firms to recapitalise and finance their pipelines, which could create opportunities for groups like Wuxi Bio.