UBS: WuXi AppTec(02359) Slightly exceeded expectations with last quarter's net profit, raising target price to HKD 154.1

UBS releases a research report stating that, based on WuXi AppTec’s (02359) performance in Q4 last year, earnings forecasts have been slightly adjusted upward, with revenue and gross margin forecasts raised. The target price has been increased from HKD 153.1 to HKD 154.1, based on discounted cash flow valuation, maintaining a “Buy” rating.

WuXi AppTec’s revenue in Q4 last year grew 9.2% year-over-year to RMB 12.6 billion, with net profit increasing 151.8% year-over-year to RMB 7.4 billion. Revenue met preliminary expectations, while net profit was slightly above forecasts. For the full year, continuing operations revenue grew 21.4% year-over-year, with an adjusted gross margin up 6.6 percentage points to 48.2%. As of the end of last year, orders on hand for continuing operations reached RMB 58 billion, up 28.8% year-over-year.

By business segment, chemical business revenue increased 25.5% year-over-year to RMB 36.5 billion, mainly driven by TIDES revenue, which grew 96% to RMB 11.4 billion. TIDES orders on hand increased 20.2%. Testing and biological business revenue grew 4.7% and 5.2%, respectively. Regionally, the US remains the main growth driver, with revenue up 34.3% year-over-year to RMB 31.3 billion, accounting for 72% of total revenue.

WuXi AppTec management guides for 18% to 22% growth in continuing operations revenue this year, reaching RMB 51.3 billion to RMB 53 billion, roughly in line with the bank’s and market expectations. The company aims to maintain stable and resilient adjusted non-IFRS net profit margins this year, with capital expenditures of RMB 6.5 billion to RMB 7.5 billion, and adjusted free cash flow of RMB 10.5 billion to RMB 11.5 billion. The group also announced a 2026 H-share incentive plan: if revenue reaches RMB 51.3 billion this year, up to HKD 1.5 billion in H-shares will be granted; if it reaches RMB 53 billion, an additional HKD 1 billion will be granted.