Affected by the "unverified list", on Tuesday, "WuXi" fell sharply across the board, and the three companies involved in the Hong Kong A-share fell sharply, of which the protagonist of the incident, WuXi Biologics, once fell 30%, and then announced the suspension of trading.
On Tuesday evening, WuXi Biologics announced that it was actively taking interim measures to remove the subsidiary from the unverified list; it had applied to the stock exchange to resume trading in the company's shares on Wednesday morning.
In the evening, a number of securities companies interpreted this in the line of fire, among which Anxin Securities believes that the UCL list has a limited impact on domestic CXO companies such as WuXi Biologics, and its global industrial advantages are outstanding, and R & D and production outsourcing orders are expected to continue to transfer to China.
Moving out of the list may not be difficult
The "Unverified List" is different from the "Entity List" represented by the ZTE incident, which mainly restricts trade behaviors that may endanger U.S. national security and diplomatic relations, while the "Unverified List" mainly targets the restriction of end-use. The former requires listed U.S. companies not to trade with Chinese companies, while the latter requires U.S. companies to investigate the end-use of Chinese companies' products when doing business with Chinese companies.
According to e company reports, industry insider Zhang Jun (pseudonym) said that the main reasons for being included in the "unverified list" may have several reasons: one is that the end use is inconsistent with the original agreed use (such as requiring self-use and cannot be resold), the second is that the end use cannot be verified for various reasons, and the third is that downstream customers do not cooperate with the end use verification. In short, the other party is not assured of the use of the goods purchased by our hands, and is not sure whether it has been provided to the object that should not be provided.
Specific to actual operation, enterprises that are included in the "unverified list" need to sign a series of statements with U.S. companies, provide a series of end-use certification materials, and agree to the U.S. Department of Commerce to review the end-users of goods when purchasing raw materials or equipment from relevant manufacturers in the United States, which increases transaction uncertainty and transaction costs.
In this case, the listed enterprises have two solutions: one is to cooperate with the review and provide a series of supporting materials, and strive to be removed from the list; Achieving autonomous controllability and production is the safest and most reliable solution, but in the short term, in order to stabilize production and operation, enterprises may mainly cooperate with the review.
So is it not easy to review strictly and apply for removal from the list? It depends on why the company is on the list.
Zhang Jun analyzed that WuXi Biologics had previously submitted to the US Department of Commerce for approval every year and had always been approved, and in the past two years, the other party could not conduct on-site verification due to the epidemic. If WuXi Biologics has been abiding by the rules of the other party, it only needs to undergo one on-site inspection to lift the restriction.
There have also been precedents for quick removal from the list. In April 2019, the United States added 37 Chinese entities to the "unverified list", including listed companies such as Sanan Optoelectronics. In June of the same year, Sanan Optoelectronics was removed from the list in less than three months.
How big is the impact? That's what the agency said
How much of an impact did this incident have on CXO?
Essence Securities believes that the UCL list has a limited impact on domestic CXO companies such as WuXi Biologics, and the CXO industry continues to prosper.
Essence Securities said that the "UVL List" is different from the "Entity List", and its impact is mainly reflected in the temporary inability to accept U.S. exports through licensing exceptions, etc., but after the U.S. Department of Commerce verifies that the entity can be removed from the UTL list.
For WuXi Biologics, in the short term, the controlled commodities involved include bioreactors and some filters, etc., and the Shanghai and Wuxi companies involved have completed the construction of production capacity, and there is no need to import controlled commodities in the short term. In the medium to long term, WuXi Biologics' imports of controlled commodity use compliance, and the company will cooperate with the U.S. Department of Commerce to verify that it can be removed from the UTL list. In addition, alternative suppliers exist in Europe and domestically for commodities such as bioreactors and some filters.
Essence Securities said that the UTL list has a limited impact on domestic CXO companies such as WuXi Biologics, and its global industrial advantages are outstanding, and R&D and production outsourcing orders are expected to continue to shift to China.
Zheshang Pharmaceutical also said that this incident is due to the obstruction of overseas review of the new crown epidemic, the use of procurement materials is unknown, and it may be removed after clarification; in the short term, the infrastructure of Wuxi and Shanghai factories has been improved, and the alternative suppliers of regulated consumables are sufficient, which has less impact on operations; in the long run, this is another rapid development of local CXO and the improvement of the status of the global industrial chain. We recommend an accelerated capacity building, a rapid increase in market share, and a stronger supply chain autonomy and control.
Source: Tencent Select Stocks Composite