UBS has released a research report adjusting its profit forecast for WUXI APPTEC (02359) based on its fourth-quarter performance last year. The firm raised its revenue and gross margin projections, increasing the target price from HK$153.10 to HK$154.10, while maintaining a "Buy" rating based on a discounted cash flow valuation. In the fourth quarter of last year, WUXI APPTEC reported revenue of RMB 12.6 billion, a 9.2% year-on-year increase, and net profit of RMB 7.4 billion, up 151.8% year-on-year. Revenue was in line with preliminary results, while net profit slightly exceeded expectations. Revenue from continuing operations for the full year rose 21.4% year-on-year, with adjusted gross margin improving by 6.6 percentage points to 48.2%. As of the end of last year, the backlog of continuing operations reached RMB 58 billion, an increase of 28.8% year-on-year. By business segment, chemical business revenue grew 25.5% to RMB 36.5 billion, driven primarily by TIDES business revenue, which surged 96% to RMB 11.4 billion. The TIDES backlog increased 20.2% year-on-year. Testing business and biology business revenue grew 4.7% and 5.2%, respectively. Geographically, the U.S. market remained the primary growth driver, with revenue rising 34.3% to RMB 31.3 billion, accounting for 72% of total revenue. Management guidance for this year projects continuing operations revenue growth of 18% to 22%, reaching RMB 51.3 billion to RMB 53 billion, broadly in line with market expectations. The company aims to maintain a stable and resilient adjusted non-IFRS net profit margin 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 an H-share incentive plan for 2026, under which up to HK$1.5 billion in H-shares will be granted if this year's revenue reaches RMB 51.3 billion, with an additional HK$1 billion granted if revenue reaches RMB 53 billion.
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