1Q26 results: a strong start driven by CDMO services

Pharmaron Beijing (300759 CH) 1Q26 results:a strong start driven byCDMOservices Target PriceRMB39.00(Previous TPRMB39.00)Up/Downside31.1%Current PriceRMB29.75 Pharmaronreported 1Q26 results,with revenue growing 15.5%YoY toRMB3.58bn and adj.non-IFRS attributable net profit increasing 16.2% YoY toRMB406mn. 1Q26 revenue/adj. net profit accounted for 21.8%/18.8% of our full-year estimates, largely in line with historical ranges. New ordersin 1Q26 surgedover 30% YoY,a significant acceleration from the 14% YoY growth recorded in2025. Mgmt. maintained full-year revenue growth guidance of 12%-18%. China HealthcareBenchen HUANG, CFAhuangbenchen@cmbi.com.hk Demandaccelerated in 1Q26.Total new orders grew by >30% YoY in 1Q26,including >20% and >50% YoY growth for lab services and small moleculeCDMO,respectively, both significantly outpacing their 2025 growth rates.This encouraging order momentum was primarily driven by: 1) Successfulstrategic expansion with MNC clients, with 1Q26 revenue from Top 20 globalpharmaceutical companies soaring 47.98% YoY; 2) A recovery in domesticdemand, as revenue from Chinese clients grew 43.4% YoY, coupled withastrong out-licensing trend where Pharmaron has been playing a critical role;3) Continued rapid revenue growth from new modalities; and 4) The signingof amajorDP(Drug Product)contract in the small molecule CDMO segment,alongside the progression of other pipeline projects into later stages. Jill WU, CFA(852) 3900 0842jillwu@cmbi.com.hk Stock Data Strong demand in small molecule CDMO.Thesegment generated revenueof RMB866mn in 1Q26, up 25.0% YoY, significantly outperforming othersegments. Notably, the Company secured a commercial DPcontract for EliLilly's oral small molecule GLP-1 drug,Orforglipron, in 1Q26. Serving over1,000projects annuallywith a broad coverage of promising targets andmolecules, Pharmaron is well-positioned to capture major manufacturingorders in the future. As current capacity is highly utilized, the Company willcontinue to advance the PhII construction at Shaoxing site and plan for newcapacity expansions. Mgmt. expectscapex for 2026 to be ~RMB3.0bn(+12.4% YoY), with a strategic focus on bolstering CDMO capacity for late-stage projects and new modalities. Based on current demand and capacityplanning, mgmt.expects the small molecule CDMO segment to consistentlyoutpace the Company’soverall growth in the coming years. Clinicalservices targeting loss reduction this year.Revenue from clinicalservices increased by11.8% YoY, accelerating from the 7.1% YoY growth in2025. However, segmentGPMcame in at7.1% in 1Q26, down 4.7ppts YoY,primarily due to revenue mix changes and pricing competition in Chinamarket. Regarding new orders,SMO pricing has shownrecoveries, whileCRO price pressure has moderated compared to last year. Nevertheless,given the long conversion cycle of clinical programs, the Company is stillexecuting low-priced orders secured last year. Mgmt. expects the segment toremain in a loss-reduction phase throughout 2026, with performance likely toimprove next year as higher-priced orders set to beconvertedinto revenue. Source: FactSet MaintainBUY.Our DCF-based TP is maintained atRMB39.00 (WACC of9.32%; terminal growth of 2.0%; both unchanged). We forecast Pharmaron’srevenue to grow by16.5%/ 16.2%/ 14.9%YoY and adj. net profit to increaseby18.8%/ 17.8%/ 16.1%YoY in 2026E/ 27E/ 28E, respectively. Disclosures& Disclaimers Analyst CertificationTheresearch analyst who is primary responsible for the content of this research report, in whole or in part, certifies that withrespect to the securities or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect hisor 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 confirmsthat 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 in this research report within 30 calendar days prior to thedate 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 covered in 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 to outperform 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