Ambitious capacity expansion to continue

WuXi XDC (2268 HK) Ambitious capacity expansion to continue WuXi XDC reported 2025 financial results, delivering a robust 46.7% YoYincreasein revenue with a significantYoY growth of 69.9% for adj. attributablenet profit. The Company's 2025 revenue slightly beat our forecast by 0.6%,whereas its adj. net profit came in marginally below our estimate by 1.6%. As ofthe end of 2025, its backlog surged by 50.3% YoY to reachUS$1.49bn, whilenewly signed orders during theyear grew by 41% YoY to US$1.33bn, sustainingthe rapid growth momentum. Driven by thisstrong order book, mgmt. anticipated2026 revenue to grow by more than 40% YoY (USD-denominated), with theGPM expectedto remain at least flat compared to 2025. Target PriceHK$82.00(Previous TPHK$88.00)Up/Downside46.0%Current PriceHK$56.15 China HealthcareBenchen HUANG, CFAhuangbenchen@cmbi.com.hk Strongmomentum of conjugated drug R&D and manufacturingdemand continued.Fueled by robust demand from both Chinese and USclients, WuXi XDC signed a record-breaking 70 new iCMC projects in 2025,up 32% YoY. Note that22 of these projects were transferred from externalsources, highlighting WuXi XDC's growing customer trustand competitiveedgewithin the global XDC CDMO industry. Furthermore, novel XDCprojects accounted for nearly 50% of newly signed projects,implying WuXiXDC's active rolein the frontier fields of conjugated drugs.In addition,PPQprojects skyrocketed by 125% to 18 in 2025, signaling strong potential forcommercialbusinessin the near future. Giventhe company's robust "D"capabilities andthe highly encouraging outlook for its commercializationbusiness, mgmt. anticipatedthat by 2030, 20% of total revenue will bederivedfrom novel XDC projects,and another 20%will come fromcommercial-stage projects.Significantly strengthenedglobal manufacturing network.In Jan 2026, Jill WU, CFA(852) 3900 0842jillwu@cmbi.com.hk Stock Data WuXi XDC announced the acquisition of BioDlink (1875.HK, NR). Beyondexpanding customer reach and project pipeline, the acquisition will rapidlyboost its productioncapacities, particularlythe highly sought-after ADC DSand DPcapacities.For instance, BioDlink's annual DP capacity of 8 millionvialsslightly exceedsWuXi XDC's current largest drug product facility, DP3,which has an annual capacity of 7 million vials.Domestically,the Companyisconstructing a new payload-linker site in Jiangyin, with a planned capacityfive times the current level of its existing Wuxi site.Internationally,itsSingapore site is expected to achieve GMP release in 1H26, whilethe USsite is currently insite-selection phase.Thiscontinuous expansion ofglobalcapacity network will enable WuXi XDC to better serve its worldwide clientbase. WuXi XDC plans to invest a total of RMB8.0bn in Capex between 2026and2030.For 2026 alone,Capex is projected to reach RMB3.1bn,representinga massive 158% YoY jump over 2025. Out of this 2026 budget,RMB1.68bn is earmarked specifically for BioDlink facilities to ensureseamless integration and operational excellence.Maintain BUY.To factor in the updated guidance, we reduce our forecasts Source: FactSet forbottomline.We project WuXi XDC’s revenue to grow by36.2%/ 31.7%/29.9%YoY and adj. net profitto increase by 34.5%/ 31.7%/ 32.5% YoY in2026E/ 27E/ 28E, respectively. Hence, we cut our DCF-based TPfromHK$88.0to HK$82.0(WACC:9.67%,terminal growth:2.00%;bothunchanged).We arestillpositive on the long-term growth of WuXi XDC. Disclosures& Disclaimers Analyst CertificationThe research analyst who is primary responsible for the content of this research report, in whole or in part, certifies thatwith respect to the securities or issuer that the analyst covered in thisreport: (1) all of the views expressed accurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides, the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered inthis research report within 30 calendar days prior to the date of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3)serve as an officer of any of theHongKong listed companies covered in this report; and (4) have any financial interests in the Hong Kong listed companies coveredin this report. CMBIGM RatingsBUY : Stock with potential return of over 15% over next 12 monthsHOLD: Stock withpotential return of +15% to-10% over next 12 monthsSELL: Stock with potential loss of over 10% over next 12 monthsNOT RATED: Stock is not rated byCMBIGM :Industry expected to outperform the relevant broad marketbenchmark over next 12 months:Industry expected to perform in-line with the relevant broad market benc