WuXi Biologics: Concerns Over U.S. Ban Overdone; Shares Undervalued

WuXi Biologics shares have fallen 30% since the Biosecure Act bill was proposed in the U.S. House of Representatives, which seeks to ban the use of U.S. genomics by Chinese companies. While we don’t think the bill’s provisions have a direct material impact on WuXi Biologics, the bill nonetheless raises geopolitical uncertainty. However, we think the concerns are overblown, as first, we think the chance of the bill becoming law is currently low. Second, WuXi Biologics does not own or use any U.S. genomics equipment. We fine-tune our WuXi Biologics assumptions after a fresh look to better reflect the latest management guidance for 2023 and 2024. Our fair value estimate is slightly lowered to HKD 57.90 per share from HKD 60.70 per share. We think the shares are trading at an attractive discount.