By Shares of Wuxi Biologics (Cayman) have been halted in Hong Kong after a significant 24% slide, prompted by guidance for lower profit and weaker-than-expected revenue. With the stock falling 45% this year, Monday’s decline of 33.15 Hong Kong dollars (US$4.24) marks its biggest single-day drop since its listing in 2017.
Weaker Bottom Line and Revenue Growth
Wuxi Biologics attributes its projected weaker bottom line to increased spending on capacity expansion and lower revenue growth. As a result, it anticipates falling short of its 30% revenue growth target. The company highlights that they expect around 40 fewer projects, translating into a revenue gap of about US$300 million. Additionally, delays in regulatory approval are anticipated to impact an additional US$100 million in revenue.
Challenging Goals and Industry Climate
The company acknowledges that its goal of adding 120 new projects this year was overly optimistic. As of November, Wuxi Biologics has added 91 new projects, compared to 138 and 136 for 2021 and 2022, respectively. The company also recognizes the near-term challenges faced by the industry, expecting a slowdown in biotech funding. Consequently, annual growth in the single digits is projected, a significant decrease from the historical rate of around 15%.
Forecasting a Turnaround
Despite the current challenges, Wuxi Biologics believes that its gross profit margin and growth rate have likely reached their bottom this year. The company forecasts a turnaround in the second half of 2024.
Financial Highlights
In the first half of this year, Wuxi Biologics recorded a revenue of 8.49 billion yuan (US$1.19 billion), marking an 18% increase from the previous year. However, profit declined by 11% to CNY2.27 billion.
Comments