Morgan Stanley Comments On WuXi Pharmatech's Growth

WuXi Pharmatech's WX stock has had a lackluster performance YTD even though the company delivered solid 2010 results and provided upbeat 2011 forecasts. Although Morgan Stanley thinks most investors have factored in the revenue potential from its core lab service business, Vertax manufacturing contact, and toxicology tests, it believes the market has overlooked the potential from its biological manufacturing and CRO services to China-based companies. In Morgan Stanley's view, these services could provide upside surprise to consensus for outer years and become the catalyst for a stock re-rating. Because it is too early to quantify any upside, Morgan Stanley is providing qualitative comments based on its interaction with management at its China healthcare trip and post 2010 earnings calls. Morgan Stanley believes the stock is undervalued at 17x 2011e EPS. Morgan Stanley has an Overweight rating on WX WX closed Tuesday at $16.43