WuXi PharmaTech (603259): Significant achievements in two strategic achievements, sustained high growth

WuXi PharmaTech (603259): Significant achievements in two strategic achievements, sustained high growth
The Q1-3 2019 results are in line with expectations, and the company’s non-net profit is higher than expected. The company announced the first three quarters of 2019 results: revenue 92.79 trillion, an increase of 34 in ten years.06%; net profit attributable to parent company 17.65 ppm, a decrease of 8 per year.46%; deduct non-net profit 17.1.4 billion, an annual increase of 36.88%; corresponding profit 1.The net profit of RMB 80,000 was higher than our expectation, mainly due to the increase in the shareholding of Hequan Pharmaceutical, the decline in Q3 management fee rate and the high growth of laboratories in China.  Development trend Q3 single-quarter deduction of non-net profit exceeded expectations.In the first three quarters of 2019, the company’s revenue and net profit increased by 34 respectively.06%, down 8.46%; the company’s loss from changes in fair value from January to September was 4,539.670,000 yuan, a decrease of 7 compared with the same period last year.1.4 billion US dollars, is the company’s main source of non-recurring profits and losses.The company deducted non-net profit from January to September 17.140,000 yuan, an increase of 36 in ten years.88%, of which Q3 deducted non-net profit for the quarter.21 ppm, a 69-year 厦门夜网 increase.63%, exceeding our expectations.We expect the company’s high-growth CDMO subsidiary, Hequan Pharmaceutical, to increase its shareholding ratio and the Q3 single quarter management fee rate to decline (-2.54ppt) and the high growth of China’s laboratory business is the most important factor in the high growth of non-net profit.  The transformation strategy and long tail strategy achieved remarkable results.The company has basically completed the layout of the entire CRO & CMO industry chain. In 2019H1, it will further improve the upstream and downstream industry chain, and actively promote the transformation strategy and long tail strategy on the basis.In the first three quarters, the gradual and sales split charging model assisted customers in completing 16 clinical new drug clinical applications and obtaining 20 project 无锡桑拿网 clinical trial licenses.With the advancement of the two major strategies, the company’s customer stickiness has further increased. At the same time, we expect that research and development into the later planning orders will also help improve the company’s overall profitability.  CDMO and clinical CRO perform well.CDMO and clinical CRO companies are the two strongest performing business segments.We expect the company ‘s CDMO sector to exceed its growth rate by 40% + from January to September. At present, the company ‘s capacity expansion plan is to 2022. We expect the CDMO sector to continue its rapid growth trend in the future.With the advancement of the two major strategies, the rise of clinical CRO is rapid. We expect the quarter-to-quarter growth rate of 60% +.  Earnings Forecasts and Estimates We maintain our 2019/2020 earnings forecasts.40/1.74 yuan unchanged, an increase of 1 each year.3% / 24.7%.We maintain our Outperform rating on A / H shares.The company’s current A shares can continue to correspond to 61/49 times P / E in 2019/2020, and H shares are committed to correspond to 54/43 times P / E in 2019/2020.  Considering that the company’s two major strategic achievements are gradually confirmed and the certainty of high growth in the future is gradually strengthened, we raise the A-share target price by 14% to 105 yuan, corresponding to a P / E of 75 / 60X in 2019/2020, which is expected to be higher than the current A-shareThere is 228% upside; raise the target price of H shares by 14% to HK $ 105, corresponding to a P / E of 68X / 54X in 2019/2020, which is 24 more feasible than the current H shares.1% upside.  Volatility of risk outsourcing business orders, foreign exchange risk.