CICC: Maintains "outperform" rating on WUXI XDC (02268) with target price raised to HK$39.

CICC released a research report, maintaining a "outperform industry" rating for WUXI XDC (02268). Due to continued strong demand, rapid capacity expansion, cost control, and improved operational efficiency, the adjusted net profit for 2024/2025 was raised by 58.9%/31.6% to 1.12 billion RMB/1.48 billion RMB, with the introduction of adjusted net profit for 2026 at 1.88 billion RMB for the first time. The target price was raised by 34.5% to 39 HKD. The company released its 2024 performance forecast, expecting revenue, net profit, and adjusted net profit to increase by over 85%/260%/170% year-on-year in 2024, and participation in the 43rd J.P. Morgan Healthcare Conference. Key points from CICC: Strong growth in 2024, confident about 2025. The company released its performance forecast, expecting revenue, net profit, and adjusted net profit to increase by over 85%/260%/170% year-on-year in 2024. The revenue growth far exceeds the initial guidance of 45% at the beginning of 2024, mainly benefiting from rapid expansion of ADC industry demand. The company, as a scarce integrated bio-conjugated CDMO player, has competitive advantages. The profit margin improvement in 2024 is mainly due to the increase in production capacity utilization, the use of self-built production capacity, and operational efficiency improvement. Based on the progress of the current pipeline, the company conservatively expects revenue growth in 2025 to exceed 35%. Rapid growth in projects, expecting commercial project volume increase; expansion of new molecular forms expected to further expand the XDC market. By the end of 2024, the company had 194 integrated projects (167/143 in 1H24/2023), 8 PPQ projects (9/5 in 1H24/2023), one commercial project with BIC potential, and 681 drug discovery projects (538/427 in 1H24/2023). In 2024, 53 new integrated projects were added, with iCMC inquiries up 38% year-on-year, including a 43% increase in inquiries from US customers. The projects within the pipeline progressed smoothly, with 45 projects advancing from drug discovery to CMC stage in 2024, and 30 projects submitting IND applications. The company expects existing PPQ projects to start submitting marketing applications from 2025 onwards. As projects progress, the company may start producing more commercial projects in 2026, according to the bank. In 2024, the company completed 3,700 different types of ADC/XDC molecules, with non-traditional ADC accounting for 38% of them. They expanded into more innovative molecular forms including bispecific ADCs, dual payload ADCs, antibody-conjugated degraders (DACs), and small nucleic acid antibody-conjugated drugs (AOCs). In addition, the company's proprietary patent screening platform, WuXiDAR4TM, was upgraded to WuXiDARxTM. The company successfully developed 45 preclinical candidate drugs on this platform, with 7 products entering the clinical stage, expecting future revenue sharing. Continued global capacity expansion construction. The company expects the DP3/DP5 lines at the Wuxi factory to start production in 1H25/2H27 respectively, increasing formulation capacity to three times the current level. The Singapore factory construction is accelerating, and the company expects it to come online by the end of 2025 or early 2026. With the operation of the self-owned monoclonal antibody production line, the bank believes that the company's gross margin may gradually improve. As of 2024, the company's employee count exceeded 2,000, a year-on-year increase of over 70%.