Goldman Sachs: Raises Target Price for WuXi AppTec to HKD 29.3, Management Expects Continued Improvement in Gross Margin in the Second Half of the Year.

Goldman Sachs raised its earnings forecast for WuXi Biologics by 11.9% to 15.9% for the years 2020 to 2027, reflecting better-than-expected gross margin improvements. The target price was raised from HK$25.6 to HK$29.3, with a forecasted P/E ratio of 23 times and a neutral rating. The bank pointed out that the company's medium-term gross margin would expand by 3.6 percentage points to 42.7%, driven by reduced employee stock compensation, increased milestone revenue in the research and development department, and improvements in the utilization of new capacity, offsetting losses from the Irish project. The report mentioned that the management expects the gross margin improvement to continue in the second half of the year, based on increased operational efficiency and capacity utilization. The long-term gross margin target is 50%, with the gross margin of the Singapore plant expected to reach around 45%.