WuXi AppTec reported strong 3Q25 results, with revenue increasing by 15.3% YoY (including 19.7% YoY growth for continuing operations) and adj. non-IFRS net profit surging by 42.0% YoY. Revenue from continuing operations in 9M25 accounted for 73.8% of our full-year forecast, in line with historical average of 72%, while adj. non-IFRS net profit in 9M25 represented 85.7% of our full-year forecast, significant higher than the historical average of 72%. WuXi AppTec delivered strong operational execution, despite ongoing macro uncertainties. As such, mgmt. further raised its full-year guidance for 2025, expecting total revenue to be RMB43.5-44.0bn (previously: RMB42.5-43.5bn) with revenue from continuing operations to grow by 17-18% (previously: 13-17%). Mgmt. continued to expect adj. non-IFRS net profit margin to expand in 2025.

Encouraging demand growth in small molecule D&M business. As of Sept 2025, WuXi AppTec’s backlog from continuing operations reached RMB 59.88bn with a strong YoY growth of 41.2%, accelerated from 37.2% YoY as of Jun 2025. In contrast, backlog for TIDES services grew by 17.1% YoY as at end-Sept 2025, slowing from 48.8% YoY seen as at end-Jun 2025. The divergence underscored the small molecule D&M business as a primary growth driver for backlog in 3Q25. With that, mgmt. expected accelerated revenue growth for this segment in 2026. Mgmt. noted that the Company’s pipeline included multiple promising products targeting areas such as GLP- 1, PCSK9, pain, neurology, and autoimmune diseases. Given that small molecule D&M accounted for 46% of total revenue in 2024, we believe it will become a key driver for the Company’s overall growth. To meet the rising customer demand, WuXi AppTec is actively expanding manufacturing capacity in China, Singapore, the US, and Switzerland.

Early-stage demand showing more signs of recovery, though a full rebound will take time. In the Chemistry segment, revenue from drug discovery services declined 2.0% YoY in 3Q25, though sequential QoQ improvements were seen. Notably, the safety assessment services posted 5.9% YoY and 13.2% QoQ revenue growth in 3Q25, a significant rebound from the 7.8% decline in 2Q25, suggesting a recovery in client demand and improved pricing dynamics. Within the Biology segment, revenue grew 5.9% YoY in the quarter, consistent with the pace observed in 1H25. Mgmt. indicated that early signs of demand recovery are emerging, supported by a rebound in China’s capital markets, robust global BD activity, and US interest rate cuts. However, a broad-based industry recovery will still take time. Given the high sensitivity to macroeconomic conditions, we believe early-stage businesses within WuXi AppTec should have relatively high visibility over the next two years, as market conditions normalize.

Maintain BUY. We raise our DCF-based TP from RMB118.79 to RMB123.35 (WACC: 9.39%, terminal growth: 2.00%; both unchanged), to factor in our improved outlook on the macro environment. We now expect revenue to grow by 12.8%/ 10.7%/ 14.2% YoY (for continuing operations: 18.0%/ 15.0%/ 14.2% YoY) and adjusted non-IFRS net profit to grow by 19.6%/ 10.2%/ 13.3% YoY in 2025E/ 26E/ 27E, respectively.