Goldman Sachs Maintains "Buy" Rating for WuXi PharmaTech, Inc.

In a report published earlier today, Goldman Sachs reiterated its “Buy” rating for Wuxi PharmaTech, Inc. WX in response to WX's earnings conference call. According to the report, WX provided guidance for the fiscal year 2011, projecting 17-21% net revenue growth yoy and 50-60% manufacturing services growth. In addition, WX guided an expected 14-18% and 8-10% growth in lab services in China and the United States, respectively. WX notes that it does not expect much operating leverage due to the rising costs as a result of the expansion of its workforce by 800-1000 new employees.

Goldman Sachs believes that WX is well-positioned in China's contract research organization (CRO) industry. In addition, Goldman Sachs revised its estimates downwards for revenues and earnings, with $1.18 and $1.40 for 2011 and 2012, respectively. These estimates reflect rising taxes and readjustments in revenue projections. Despite the negative adjustments in estimates, Goldman Sachs still reaffirms its “Buy” rating for WX with a price target of $21.50, citing price competition in the lab service industry, rising labor cost, and slower international demand as potential risks to WX.

WX is currently trading at $16.93.