JPMorgan has reaffirmed its "overweight" rating on Wuxi Apptec (02359) H-shares, setting a target price of HK$184 based on a discounted cash flow valuation assuming a terminal growth rate of 3% and a weighted average cost of capital of 10.9%. The firm's second-quarter results were robust, with both revenue and adjusted net profit significantly exceeding the investment bank's forecasts by 25% and 47%, respectively, supporting further upward revisions to earnings projections.
Management has raised its fiscal year 2026 revenue guidance to a range of RMB 58.5 billion to RMB 60.5 billion, up from the previous estimate of RMB 51.3 billion to RMB 53 billion. The company now anticipates a 35% to 39% year-over-year increase in continuing operations revenue, a notable jump from the earlier forecast of 18% to 22%. While some investors may still be inquiring about the ongoing 1260H lawsuit and its potential impact on demand, the magnitude of this guidance upgrade, coupled with a 25.2% year-over-year growth in order backlog, should further reinforce confidence that underlying demand for Wuxi Apptec remains exceptionally strong.
The report highlights that second-quarter revenue grew 48% year-over-year to RMB 16.5 billion, while adjusted non-IFRS net profit surged 92% to RMB 7 billion, resulting in an adjusted net profit margin of 42.4%鈥攅xceeding the investment bank's full-year 2026 forecast of approximately 36%. The core WuXi Chemistry segment saw sales increase 61% year-over-year, with the TIDES business growing over 75%, accompanied by margin expansion. Backlog expanded 25.2% year-over-year to RMB 66.4 billion. Consensus expectations are likely to see significant upward revisions. The raised fiscal year 2026 revenue guidance indicates growth well above prior market projections, and the adjusted non-IFRS earnings for the first half of 2026 already represent about 59% of the bank's full-year forecast. Market consensus for revenue, margins, earnings, and free cash flow is expected to be revised higher, and with improved visibility and backlog growth, valuation support is likely to strengthen. The investment bank believes this performance will drive the stock price up by 5% to 10%.
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