【行业研究报告】药明康德-Rising demand for small molecule D&M business

RisingdemandforsmallmoleculeD&Mbusiness
WuXiAppTecreportedstrong3Q25results,withrevenueincreasingby15.3%
YoY(including19.7%YoYgrowthforcontinuingoperations)andadj.non-IFRS
netprofitsurgingby42.0%YoY.Revenuefromcontinuingoperationsin9M25
accountedfor73.8%ofourfull-yearforecast,inlinewithhistoricalaverageof
72%,whileadj.non-IFRSnetprofitin9M25represented85.7%ofourfull-year
forecast,significanthigherthanthehistoricalaverageof72%.WuXiAppTec
deliveredstrongoperationalexecution,despiteongoingmacrouncertainties.As
such,mgmt.furtherraiseditsfull-yearguidancefor2025,expectingtotalrevenue
tobeRMB43.5-44.0bn(previously:RMB42.5-43.5bn)withrevenuefrom
continuingoperationstogrowby17-18%(previously:13-17%).Mgmt.continued
toexpectadj.non-IFRSnetprofitmargintoexpandin2025.
EncouragingdemandgrowthinsmallmoleculeD&Mbusiness.Asof
Sept2025,WuXiAppTec’sbacklogfromcontinuingoperationsreachedRMB
Sept2025,WuXiAppTec’sbacklogfromcontinuingoperationsreachedRMB
59.88bnwithastrongYoYgrowthof41.2%,acceleratedfrom37.2%YoYas
ofJun2025.Incontrast,backlogforTIDESservicesgrewby17.1%YoYas
atend-Sept2025,slowingfrom48.8%YoYseenasatend-Jun2025.The
divergenceunderscoredthesmallmoleculeD&Mbusinessasaprimary
growthdriverforbacklogin3Q25.Withthat,mgmt.expectedaccelerated
revenuegrowthforthissegmentin2026.Mgmt.notedthattheCompany’s
pipelineincludedmultiplepromisingproductstargetingareassuchasGLP-
1,PCSK9,pain,neurology,andautoimmunediseases.Giventhatsmall
moleculeD&Maccountedfor46%oftotalrevenuein2024,webelieveitwill
becomeakeydriverfortheCompany’soverallgrowth.Tomeettherising
customerdemand,WuXiAppTecisactivelyexpandingmanufacturing
capacityinChina,Singapore,theUS,andSwitzerland.
Early-stagedemandshowingmoresignsofrecovery,thoughafull
reboundwilltaketime.IntheChemistrysegment,revenuefromdrug
discoveryservicesdeclined2.0%YoYin3Q25,thoughsequentialQoQ
improvementswereseen.Notably,thesafetyassessmentservicesposted
5.9%YoYand13.2%QoQrevenuegrowthin3Q25,asignificantrebound
fromthe7.8%declinein2Q25,suggestingarecoveryinclientdemandand
improvedpricingdynamics.WithintheBiologysegment,revenuegrew5.9%
YoYinthequarter,consistentwiththepaceobservedin1H25.Mgmt.
indicatedthatearlysignsofdemandrecoveryareemerging,supportedbya
reboundinChina’scapitalmarkets,robustglobalBDactivity,andUSinterest
ratecuts.However,abroad-basedindustryrecoverywillstilltaketime.Given
thehighsensitivitytomacroeconomicconditions,webelieveearly-stage
businesseswithinWuXiAppTecshouldhaverelativelyhighvisibilityoverthe
nexttwoyears,asmarketconditionsnormalize.
MaintainBUY.WeraiseourDCF-basedTPfromRMB118.79toRMB123.35
(WACC:9.39%,terminalgrowth:2.00%;bothunchanged),tofactorinour
improvedoutlookonthemacroenvironment.Wenowexpectrevenuetogrow
by12.8%/10.7%/14.2%YoY(forcontinuingoperations:18.0%/15.0%/
14.2%YoY)andadjustednon-IFRSnetprofittogrowby19.6%/10.2%/
13.3%YoYin2025E/26E/27E,respectively.