WuXi AppTec reported impressive financial results for 2025, with revenue growing by 15.8% YoY (including 21.4% YoY growth for continuing operations) and adj. non-IFRS attributable net profit expanding at a remarkable 41.3% YoY. The Company's 2025 revenue and adj. net profit beat our estimates by 2.7% and 18.2%, respectively. Looking ahead, mgmt. projects 2026 revenue to reach RMB 51.3-53.0bn, along with 18-22% YoY revenue growth for continuing operations, while the adj. non-IFRS net profit margin is expected to remain stable.

Strong CDMO demand. As of 4Q25, the backlog for WuXi AppTec’s continuing operations grew by 28.8% YoY (or 34% on a constant currency basis) to reach RMB58.0bn. Although this signifies a deceleration from +45.8% YoY growth recorded as of 3Q25, we note that such growth is highly commendable given the already massive absolute base of backlog, clearly indicating the consistently high demand from global customers, particularly for its CDMO services. As of 4Q25, backlog for TIDES increased by 20.2% YoY, accelerating from the +17.1% growth at the end of 3Q25. Mgmt. disclosed that the TIDES backlog has reached ~RMB20.0 bn. Based on this figure, we calculate that the backlog for other businesses booked YoY growth of 33.8% in 2025, and we believe the strong growth was primarily driven by the small molecule D&M business. Supported by the robust demand, mgmt. forecasts that the TIDES business will grow by 30-40% YoY (on a constant currency basis) in 2026, while the small molecule D&M business is also expected to experience accelerated growth.

Early-stage businesses recovering with improvement in revenue growth. Within the chemistry segment, full-year revenue for small molecule drug discovery services declined by 3.8% YoY (a marked improvement from the -28.7% YoY drop in 2024), with 2H25 seeing a narrowed decline of 2.2% YoY. Revenue from Testing segment grew by 4.7% YoY (vs -8.0% YoY in 2024), driven by 8.8% YoY growth in 2H25. Similarly, revenue from Biology segment increased by 5.2% YoY (vs -0.3% YoY in 2024). As the global biotech funding continues to recover, we believe the early-stage businesses are well-positioned to maintain this recovery momentum throughout 2026.

Doubling down on global capacity expansion. WuXi AppTec's capex in 2025 amounted to RMB5.54bn, representing a YoY surge of 38.5% (vs - 27.5% YoY decline in 2024). To support ongoing global capacity build-outs and to capture future market opportunities, mgmt. anticipated 2026 capex to reach RMB6.5 - 7.5 bn, implying a YoY increase of 17.3% to 35.4%. Notably, the Company plans to further expand its solid-phase peptide synthesis reactor volume to 130,000 liters, serving as a strong indicator of the surging manufacturing demand for peptide and oligonucleotide drugs.

Maintain BUY. We raise our DCF-based TP from RMB123.35 to RMB133.00 (WACC: 9.39%, terminal growth: 2.00%; both unchanged), to factor into the updated guidance and our positive demand outlook. We now expect revenue to grow by 13.7%/ 15.7%/ 13.4% YoY (for continuing operations: 19.1%/ 15.7%/ 13.4% YoY) and adjusted non-IFRS net profit to grow by 19.9%/ 16.0%/ 13.6% YoY in 2026E/ 27E/ 28E, respectively.