Strong CDMO demand to fuel 2026 growth

Strong CDMO demand to fuel 2026 growth TargetPriceRMB133.00(Previous TPRMB123.35)Up/Downside42.0%Current PriceRMB93.68 WuXi AppTec reported impressive financial results for 2025, with revenuegrowing by 15.8% YoY (including 21.4% YoY growth for continuingoperations)and adj. non-IFRS attributable net profit expanding at a remarkable 41.3% YoY.The Company's 2025 revenue and adj. net profit beat our estimates by 2.7% and18.2%, respectively. Looking ahead, mgmt. projects 2026revenue to reach RMB51.3-53.0bn, along with18-22% YoY revenue growth forcontinuing operations,while the adj. non-IFRS net profit margin is expected to remain stable. China Healthcare Strong CDMO demand.As of 4Q25, the backlog for WuXi AppTec’scontinuing operations grew by 28.8% YoY (or 34% on aconstant currencybasis) to reach RMB58.0bn.Although this signifiesa decelerationfrom+45.8% YoY growth recorded asof 3Q25, we note that such growthis highlycommendable given the already massive absolute base ofbacklog, clearlyindicating the consistently high demand from global customers, particularlyforitsCDMO services. As of 4Q25, backlog for TIDESincreased by 20.2%YoY, accelerating from the +17.1% growth at the end of 3Q25. Mgmt.disclosed that the TIDES backlog has reached ~RMB20.0 bn. Based on thisfigure, we calculate that the backlog for other businessesbooked YoYgrowth of 33.8%in 2025,and we believe thestrong growth was primarilydriven by the small molecule D&M business. Supported by the robustdemand, mgmt. forecasts that the TIDES business will grow by 30-40% YoY(on a constant currency basis) in 2026, while the small molecule D&Mbusiness is also expected to experience accelerated growth. Jill WU, CFA(852) 3900 0842jillwu@cmbi.com.hk Benchen HUANG, CFAhuangbenchen@cmbi.com.hk Early-stage businesses recovering with improvement in revenuegrowth.Within the chemistry segment, full-year revenue for small moleculedrug discovery services declined by 3.8% YoY (a marked improvement fromthe-28.7% YoY drop in 2024), with2H25seeing a narrowed decline of 2.2%YoY. Revenue from Testing segment grew by 4.7% YoY (vs-8.0% YoYin2024), driven by 8.8% YoY growthin 2H25. Similarly, revenue fromBiologysegment increased by 5.2% YoY (vs-0.3% YoY in 2024). As the globalbiotech fundingcontinues to recover, we believe the early-stage businessesare well-positioned to maintain this recovery momentum throughout 2026. Doublingdownon global capacity expansion.WuXi AppTec'scapexin2025 amounted to RMB5.54bn, representing a YoY surge of 38.5% (vs-27.5% YoY declinein 2024). To support ongoing global capacity build-outsand to capture future market opportunities, mgmt. anticipated 2026capextoreach RMB6.5-7.5 bn, implying a YoY increase of 17.3% to 35.4%. Notably,the Company plans to further expand its solid-phase peptide synthesisreactor volume to 130,000 liters, serving as astrong indicator of the surgingmanufacturing demand for peptide and oligonucleotide drugs.Maintain BUY.We raise our DCF-based TP from RMB123.35 to Source: FactSet RMB133.00(WACC: 9.39%, terminal growth: 2.00%; both unchanged), tofactorinto theupdatedguidance andour positive demand outlook.We nowexpect revenueto grow by 13.7%/ 15.7%/ 13.4% YoY (for continuingoperations:19.1%/ 15.7%/ 13.4%YoY) and adjusted non-IFRS net profit togrow by 19.9%/ 16.0%/ 13.6% YoY in 2026E/ 27E/ 28E, respectively. 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 this report: (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 tothe 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 ortraded in the stock(s) covered in this 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 the HongKong 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 with potential 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 tooutperform the relevant broad market benchmark over next 12 months:Industry expected to perform in-line with the relevant broad market benchmark over next 12 months:Industry expected to underperformthe relevant broad ma