Wuxi Biologics: Cutting Valuation by 21% on Revenue Miss; Trading Halted by the Exchange

We reduced narrow-moat Wuxi Biologics’ fair value estimate to HKD 60.70 per share from HKD 76.80 per share following disappointing cuts in its revenue outlook. The company has indicated that projects will be delayed due to funding challenges for some of its clients. Trading in the shares has been halted by the Hong Kong Exchange and timing in the resumption of trading is uncertain. If the halt is mainly to address share price volatility and there are no additional nefarious issues, we view Wuxi as undervalued. We think project timing should normalize and the growth outlook should stay positive given its global client base and revenue contract backlogs.