UBS has released a research report stating that WuXi AppTec (02359) once again beat expectations in the third quarter and raised its guidance, prompting the broker to lift its target price from HK$243.9 to HK$255.9, reiterate its "Buy" rating, and keep the company as its top pick in the CRO sector.
In the third quarter of 2026, WuXi AppTec reported revenue of RMB 16.6 billion, up 38% year on year and 1.1% quarter on quarter, beating both the broker's and market expectations, while recurring revenue rose 43.5% year on year. Net profit attributable to shareholders reached RMB 8 billion, up 128.6% year on year and 23.6% quarter on quarter, roughly in line with the broker's forecast of RMB 8.5 billion and above the market's expectation of RMB 7.2 billion. Adjusted non-IFRS net profit came in at RMB 6.8 billion, up 61.3% year on year, above the broker's forecast of RMB 6.2 billion. The adjusted gross margin expanded 4.9 percentage points year on year.
As of the end of the third quarter, backlogs for continuing operations stood at RMB 76.7 billion, up 36.4% year on year, accelerating further from the 25.2% growth seen at the end of the second quarter and providing strong visibility for revenue growth in 2027.
The broker noted that small-molecule CDMO and TIDES revenue remained the main growth drivers. Chemistry segment revenue rose 48.6% year on year to RMB 14.4 billion, of which small-molecule development and manufacturing revenue grew about 55% year on year to RMB 8.6 billion, while TIDES revenue rose about 52% year on year to RMB 4.3 billion. Management raised its 2026 year-on-year growth guidance for TIDES to about 47% from the previous 45%. Testing segment revenue rose 32.7% year on year to RMB 1.4 billion, while biology segment revenue rose 14.4% year on year to RMB 800 million.
The company further raised its full-year 2026 total revenue guidance to RMB 61 billion to RMB 61.9 billion, lifted its continuing operations revenue growth guidance to 40% to 42% year on year, and maintained its guidance for a resilient adjusted non-IFRS net margin. Its capital expenditure plan was revised to RMB 8 billion to RMB 8.5 billion, and its adjusted free cash flow guidance was raised to RMB 14.5 billion to RMB 15.5 billion.
The broker raised its revenue and gross margin forecasts from 2026 onward to reflect greater confidence in small-molecule CDMO and TIDES, and increased its capital expenditure assumptions, lifting its earnings per share forecasts for 2026 to 2028 by 1% to 7%.
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