WuXi AppTec (603259 CH)

Guidance raised after exceptional 2Q26 earnings

WuXi AppTec delivered exceptionally strong results in 1H26, with growth accelerating through the year despite meaningful FX headwinds. In 1H26, total revenue rose 38.9% YoY to RMB28.9bn (2Q: +47.7% YoY), while revenue from continuing operations grew 48.0% YoY (2Q: +55.2% YoY). Adj. net profit surged 83.2% YoY to RMB11.6bn (2Q: +91.7% YoY), driving the adj. net margin to a record 40.0%. Demand visibility continued to improve, with backlog for continuing operations reaching RMB66.4bn as of 30 June. Mgmt. noted backlog/new bookings grew ~30%/ >40% YoY on a constant exchange basis. Mgmt. substantially raised full-year guidance by projecting 2026 revenue to reach RMB58.5-60.5bn (previously RMB51.3-53.0bn), with revenue from continuing operations to grow by 35-39% YoY (previously 18-22% YoY). Adj. net profit margin is expected to remain stable.

Broad-based growth led by Chemistry on capacity efficiency gains from late-stage and commercial projects. Mgmt. expected for greater success from several customers' products, which we believe will be the main growth driver of the Chemistry segment in 1H26. Mgmt. emphasized that over 80% of commercial projects were converted internally from its own pipeline, and late-stage plus commercial projects now contribute more than 50% of revenue, a structural mix shift that underpins both growth durability and margin resilience. Specifically, small molecule D&M revenue jumped 72.7% YoY (2Q26: +66.9%) , while TIDES revenue grew 44.3% YoY in 1H26 with 74.9% YoY growth in 2Q26, lifting full-year TIDES growth guidance to ~45% (from ~40%). Mgmt. attributed quarterly TIDES volatility to delivery scheduling and complex supply-chain planning, not underlying demand. Testing revenue rose 31.5% YoY (2Q: +35.1%) , with safety assessment services up 42.8% YoY. Biology revenue steadily grew 11.2% YoY in 1H26 (2Q26: +12.3%). Mgmt. highlighted a recovery in global early-stage R&D demand over recent quarters, particularly in new modalities, and viewed AI-driven drug discovery as a positive factor for its early-stage business.

Capacity effectively running at full utilization. TIDES capacity is planned to reach 130k L by end-2026, with three new workshops under construction two in Taixing (online in 2027) and one in Singapore (online in 2028). Small molecule capacity is targeted at 5mn L by end-2026. The construction of new Changzhou site was initiated ahead of schedule to accommodate demand. The increase of capex to RMB7.5-8.5bn reflects accelerated overseas construction and the early Changzhou start, with further potential rise over coming years. With accelerating backlog, richer late-stage mix and proactive capacity additions, growth visibility remains well supported through 2H26 and beyond.

Maintain BUY. To factor in the strong momentum of small molecule D&M and TIDES business as well as continuous recovery of early-stage business, we raise our earnings forecasts, expecting revenue to grow by 31.4%/ 18.3%/ 15.1% YoY (for continuing operations: 37.5%/ 18.3%/ 15.1% YoY) and adj. net profit to grow by 59.1%/ 14.9%/ 13.6% YoY in 2026E/ 27E/ 28E, respectively. Hence, we raise our DCF-based TP from RMB143.00 to RMB170.00 (WACC: 9.39%, terminal growth: 2.00%; both unchanged).

Earnings Summary

(YE 31 Dec)

FY24A

FY25A

FY26E

FY27E

FY28E

Revenue (RMB mn)

39,241

45,456

59,709

70,608

81,295

YoY growth(%)

(2.7)

15.8

31.4

18.3

15.1

Adjusted net profit (RMB m)

10,583

14,957

23,788

27,335

31,058

YoY growth(%)

(2.5)

41.3

59.1

14.9

13.6

EPS(Adjusted)(RMB)

3.67

5.23

8.16

9.16

10.41

Consensus EPS(RMB)

na

na

6.59

7.61

8.90

P/E(Adjusted)(x)

35.0

24.5

15.8

14.0

12.3

Source: Company data, Bloomberg, CMBIGM estimates

BUY (Maintain)

Target Price RMB170.00

(Previous TP RMB143.00)

Up/Downside 32.3%

Current Price RMB128.50

China Healthcare

Jill WU, CFA

(852) 3900 0842

jillwu@cmbi.com.hk

Benchen HUANG, CFA huangbenchen@cmbi.com.hk

Stock Data

Mkt Cap (RMB mn)

383,412.8

Avg 3 mths t/o (RMB mn)

6,479.7

52w High/Low (RMB)

131.50/87.62

Total Issued Shares (mn)

2983.8

Source: FactSet

Shareholding Structure

HK investors

25.9%

Ge Li and concerted parties

16.4%

Source: Company report

Share Performance

Absolute

Relative

1-mth

3.5%

9.9%

3-mth

17.3%

26.6%

6-mth

35.8%

45.0%

Source: FactSet

12-mth Price Performance


Source: FactSet


Figure 1: Earnings revision

New

Old

Diff(%)

RMB mn

FY26E

FY27E

FY28E

FY26E

FY27E

FY28E

FY26E

FY27E

FY28E

Revenue

59,709

70,608

81,295

52,361

60,875

69,896

14.03%

15.99%

16.31%

Gross profit

32,667

36,115

40,973

26,263

30,507

34,819

24.39%

18.38%

17.67%

Operating profit

27,289

30,320

34,545

20,903

24,732

28,748

30.55%

22.59%

20.16%

Non-IFRS net profit

23,788

27,335

31,058

18,877

22,276

25,806

26.02%

22.71%

20.35%

Non-IFRS EPS (RMB)

8.16

9.16

10.41

6.33

7.47

8.65

28.93%

22.71%

20.35%

Gross margin

54.71%

51.15%

50.40%

50.16%

50.11%

49.82%

+4.55ppt

+1.03ppt

+0.58ppt

Operating margin

45.70%

42.94%

42.49%

39.92%

40.63%

41.13%

+5.78ppt

+2.31ppt

+1.36ppt

Net margin

39.84%

38.71%

38.20%

36.05%

36.59%

36.92%

+3.79ppt

+2.12ppt

+1.28ppt

Source: Company data, CMBIGM estimates

Figure 2: CMBIGM estimates vs consensus

CMBIGM

Consensus

Diff(%)

RMB mn

FY26E

FY27E

FY28E

FY26E

FY27E

FY28E

FY26E

FY27E

FY28E

Revenue

59,709

70,608

81,295

53,541

65,230

75,025

11.52%

8.24%

8.36%

Gross profit

32,667

36,115

40,973

26,815

32,863

37,945

21.82%

9.90%

7.98%

Operating profit

27,289

30,320

34,545

22,821

26,806

30,842

19.58%

13.11%

12.00%

Non-IFRS net profit

23,788

27,335

31,058

19,048

22,521

25,921

24.89%

21.37%

19.82%

Non-IFRS EPS (RMB)

8.16

9.16

10.41

6.59

7.61

8.90

23.76%

20.32%

16.90%

Gross margin

54.71%

51.15%

50.40%

50.08%

50.38%

50.58%

+4.63ppt

+0.77ppt

-0.18ppt

Operating margin

45.70%

42.94%

42.49%

42.62%

41.09%

41.11%

+3.08ppt

+1.85ppt

+1.38ppt

Net margin

39.84%

38.71%

38.20%

35.58%

34.53%

34.55%

+4.26ppt

+4.19ppt

+3.65ppt

Source: Bloomberg, CMBIGM estimates


Figure 3: Risk-adjusted DCF valuation

DCF Valuation(in RMB mn)

2026E

2027E

2028E

2029E

2030E

2031E

2032E

2033E

2034E

2035E

EBIT

29,038

31,520

35,745

40,376

45,204

50,157

55,151

60,091

64,872

69,385

Tax rate

16.62%

15.00%

15.00%

15.00%

15.00%

15.00%

15.00%

15.00%

15.00%

15.00%

EBIT*(1-tax rate)

24,211

26,792

30,383

34,320

38,423

42,633

46,878

51,077

55,141

58,977

+D&A

3,026

3,624

4,155

4,487

4,801

5,089

5,344

5,557

5,724

5,838

• Change in working capital

-1,666

-2,549

-2,358

-2,547

-2,725

-2,889

-3,033

-3,155

-3,249

-3,314

• Capex

-10,000

Source: CMBIGM estimates

Figure 4: Sensitivity analysis of DCF model (RMB)

WACC

8.39%

8.89%

9.39%

9.89%

10.39%

Terminal growth rate

3.00%

223.88

203.47

186.33

171.73

159.15

2.50%

210.68

192.80

177.57

164.46

153.06

2.00%

199.56

183.67

170.00

158.11

147.69

1.50%

190.04

175.78

163.39

152.53

142.93

1.00%

181.82

168.89

157.57

147.57

138.68

Source: CMBIGM estimates


Financial Summary

INCOME STATEMENT

2023A

2024A

2025A

2026E

2027E

2028E

YE 31 Dec (RMB mn)

Revenue

40,341

39,241

45,456

59,709

70,608

81,295

Cost of goods sold

(23,729)

(22,965)

(23,801)

(27,042)

(34,493)

(40,322)

Gross profit

16,612

16,277

21,655

32,667

36,115

40,973

Operating expenses

(5,318)

(5,164)

(4,949)

(5,378)

(5,795)

(6,428)

Selling expense

(701)

(745)

(807)

(777)

(848)

(935)

Admin expense

(2,879)

(2,879)

(2,661)

(2,926)

(3,107)

(3,496)

R&D expense

(1,441)

(1,239)

(1,119)

(1,188)

(1,264)

(1,374)

Others

(297)

(301)

(361)

(487)

(576)

(623)

Operating profit

11,294

11,112

16,706

27,289

30,320

34,545

Gain/loss on financial assets at FVTPL

(38)

187

(137)

1,368

200

200

Investment gain/loss

234

604

8,588

455

600

600

Net Interest income/(expense)

338

787

(398)

(47)

723

752

Other income/expense

4

(1,150)

(853)

(75)

400

400

Pre-tax profit

11,832

11,540

23,906

28,991

32,242

36,496

Income tax

(2,132)

(1,972)

(4,573)

(4,819)

(4,836)

(5,474)

After tax profit

9,700

9,568

19,333

24,172

27,406

31,022

Minority interest

(94)

(117)

(182)

(100)

(114)

(129)

Net profit

9,607

9,450

19,151

24,072

27,292

30,893

Adjusted net profit

10,854

10,583

14,957

23,788

27,335

31,058

Gross dividends

2,882

2,835

6,755

7,222

8,188

9,268

BALANCE SHEET

2023A

2024A

2025A

2026E

2027E

2028E

YE 31 Dec (RMB mn)

Current assets

30,422

38,690

61,677

67,310

79,883

97,137

Cash & equivalents

13,764

18,322

35,131

38,797

47,280

60,969

Account receivables

7,922

8,044

7,281

10,066

11,903

13,704

Inventories

4,736

5,400

8,993

8,176

10,429

12,192

Prepayment

244

226

247

247

247

247

Financial assets at FVTPL

11

1,234

5,806

5,806

5,806

5,806

Other current assets

3,746

5,464

4,218

4,218

4,218

4,218

Non-current assets

43,247

41,636

41,444

50,063

57,250

63,955

PP&E

17,190

18,784

20,000

25,281

29,966

34,121

Deferred income tax

367

473

531

531

531

531

Investment in JVs & assos

2,216

2,326

2,145

2,145

2,145

2,145

Intangibles

1,864

1,575

1,281

1,148

1,016

883

Goodwill

1,821

972

864

864

864

864

Financial assets at FVTPL

8,626

8,943

8,131

11,818

14,618

17,418

Other non-current assets

11,164

8,562

8,492

8,275

8,109

7,992

Total assets

73,669

80,326

103,121

117,373

137,133

161,092

Current liabilities

14,756

16,226

19,235

21,537

24,078

26,283

Short-term borrowings

3,667

1,243

5,986

7,986

8,986

9,986

Account payables

1,645

1,764

2,450

2,751

4,292

5,497

Tax payable

1,374

1,211

2,763

2,763

2,763

2,763

Other current liabilities

8,070

12,008

8,037

8,037

8,037

8,037

Non-current liabilities

3,396

5,014

3,638

3,638

3,638

3,638

Long-term borrowings

687

2,960

1,819

1,819

1,819

1,819

Bond payables

0

0

0

0

0

0

Obligations under finance leases

1,099

547

455

455

455

455

Other non-current liabilities

1,610

1,508

1,364

1,364

1,364

1,364

Total liabilities

18,152

21,240

22,873

25,175

27,716

29,921

Share capital

2,969

2,888

2,984

2,984

2,984

2,984

Capital surplus

28,401

24,338

33,077

49,928

69,032

90,658

Other reserves

23,753

31,407

43,651

38,651

36,651

36,651

Total shareholders equity

55,122

58,633

79,712

91,563

108,667

130,293

Minority interest

395

453

535

636

749

878

Total equity and liabilities

73,669

80,326

103,121

117,373

137,133

161,092


CASH FLOW

2023A

2024A

2025A

2026E

2027E

2028E

YE 31 Dec (RMB mn)

Operating

Profit before taxation

11,832

11,540

23,906

28,991

32,242

36,496

Depreciation & amortization

2,288

2,769

3,387

2,889

3,437

3,917

Tax paid

(2,132)

(1,972)

(4,573)

(4,819)

(4,836)

(5,474)

Change in working capital

(105)

(926)

(94)

(1,666)

(2,549)

(2,358)

Others

1,504

996

(5,423)

(1,462)

(1,346)

(1,375)

Net cash from operations

13,387

12,407

17,203

23,934

26,948

31,206

Investing

Capital expenditure

(5,517)

(4,003)

(5,538)

(8,000)

(8,000)

(8,000)

Acquisition of subsidiaries/ investments

(22)

0

0

0

0

0

Net proceeds from disposal of short-term investments

(2,321)

(2,013)

132

(2,000)

(2,000)

(2,000)

Others

299

498

3,461

0

0

0

Net cash from investing

(7,561)

(5,518)

(1,945)

(10,000)

(10,000)

(10,000)

Financing

Dividend paid

(2,756)

(3,085)

(4,992)

(7,268)

(7,465)

(8,516)

Net borrowings

178

3,320

3,563

2,000

1,000

1,000

Proceeds from share issues

247

196

7,046

0

0

0

Others

(1,610)

(4,264)

(4,493)

(5,000)

(2,000)

0

Net cash from financing

(3,941)

(3,832)

1,124

(10,268)

(8,465)

(7,516)

Net change in cash

Cash at the beginning of the year

7,984

10,001

13,445

35,131

38,797

47,280

Exchange difference

132

388

(370)

0

0

0

Cash at the end of the year

10,001

13,445

29,456

38,797

47,280

60,969

Source: Company data, CMBIGM estimates. Note: The calculation of net cash includes financial assets.



Disclosures & Disclaimers

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CMBIGM Ratings

BUY : Stock with potential return of over 15% over next 12 months

HOLD : Stock with potential return of +15% to -10% over next 12 months

SELL : Stock with potential loss of over 10% over next 12 months

NOT RATED : Stock is not rated by CMBIGM

OUTPERFORM : Industry expected to outperform the relevant broad market benchmark over next 12 months

MARKET-PERFORM : Industry expected to perform in-line with the relevant broad market benchmark over next 12 months

UNDERPERFORM : Industry expected to underperform the relevant broad market benchmark over next 12 months

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