Key Takeaways:
Daiwa raised its price target on WuXi AppTec to HK$230 from HK$215, reaffirming the stock as its top pick in the sector.
The upgrade follows a US federal court's preliminary injunction barring the Defense Department from enforcing WuXi AppTec's designation on the 1260H Chinese military companies list. Daiwa said the ruling is a timely first step toward removing the company from the list and represents an initial legal victory.
Daiwa lifted its target price-earnings multiple to 21.5 times from 20 times and kept its Buy rating. The new target implies about 20 percent upside from the H-shares' close of HK$192.3 on Aug. 7.
The injunction shields WuXi AppTec from the immediate effects of the designation while it challenges the listing in court. The US is the company's largest market, with American clients contributing roughly 70 percent of revenue last year across more than 1,000 accounts.
The US District Court for the District of Columbia granted the injunction on Aug. 7, with Chief Judge James Boasberg saying the listing decision likely constituted arbitrary and capricious administrative action. The court required only $1 in security and denied the Defense Department's request to stay the injunction pending appeal.
WuXi AppTec's first-half results also beat expectations. Revenue rose 38.93 percent year over year to 28.9 billion yuan, with net profit up 29.43 percent to 11.08 billion yuan. Backlog reached a record 66.43 billion yuan, up 25.2 percent, and the company raised its full-year revenue guidance to a range of 58.5 billion to 60.5 billion yuan.
Other banks have also raised targets. Jefferies lifted its A-share target to 165 yuan and its H-share target to HK$210, while CICC raised its A-share target to 167 yuan and its H-share target to HK$211. Morgan Stanley kept an Overweight rating with a target of HK$193.
WuXi AppTec's A-shares have climbed more than 73 percent this year, closing at 154.82 yuan on Aug. 7, while H-shares are up more than 97 percent year to date.
The injunction removes a regulatory overhang that had weighed on WuXi AppTec since its June listing, letting investors focus on the company's growth. The next event to watch is the merits hearing on the 1260H designation, where the court will decide whether to formally vacate the listing.
This article is for informational purposes only and does not constitute investment advice.
