WuXi Bio Earnings: Market Is Disappointed but Stock Isn't Expensive, Trading Close to Book Value

Following interim results from narrow-moat WuXi Biologics that are largely in line with our expectations, we keep the bulk of our assumptions unchanged but raise our capital expenditure following management guidance of increased spending in 2025. This nudges our fair value estimate down to HKD 28.10 per share from HKD 28.60. However, the lack of revenue growth disappointed the market, leading to a drop in WuXi Bio’s share price by 7.8% as of the midtrading session. We continue to believe that WuXi Bio is oversold. Understandably, investors remain nervous, given that WuXi Bio stands to lose projects due to the Biosecure Act in the US. But indications so far are that its project orderbook is intact and growth guidance is maintained. Our fair value estimate assumes that WuXi Bio’s client base will eventually be largely China- and ex-US-driven, so we do think the shares are oversold. We think that when the act becomes law, it will allow greater clarity, reducing uncertainty as to what WuXi Bio will be able to undertake for its global clients.