Key takeaway

In 2025, the company’s revenue and profit were in line with expectations. In 1Q26, revenue and profit came under pressure due to the patent expiry of a major blockbuster product from a core client. The number of CDMO projects continued to increase. Overseas order demand remained strong. Pipeline quality kept improving, with rapid growth in key clinical batch and NDA projects. The TIDES business is progressing smoothly as a future growth driver. Peptide commercialization capacity continues to expand, and the capacity bottleneck is expected to be resolved. The API segment faced pressure due to industry demand. Profitability improved through structural adjustments. The company continues to advance its global expansion strategy. The Japan and South Korea markets maintained rapid growth, the US market achieved fast breakthroughs, and overseas capacity deployment is progressing. Looking ahead to 2026, revenue may face phased pressure due to large client projects. Performance is expected to gradually improve as follow-up projects ramp up. Emerging businesses will gradually contribute incremental growth and are expected to support the company’s long-term development.

Event

2025 and 1Q26 results announced

In 2025, full-year revenue reached RMB5.509bn, YoY + 6.74%; net profit attributable to shareholders of the parent company reached RMB0.73bn, YoY +20.46%; net profit attributable to shareholders of the parent company excluding non-recurring items reached RMB0.729bn, YoY + 22.83%. In 1Q26, the company recorded operating revenue of RMB1.201bn, YoY - 19.43%; net profit attributable to shareholders of the parent company reached RMB0.172bn, YoY - 31.22%; net profit excluding non-recurring items reached RMB169mn, YoY - 32.67%.

2025 revenue performance met expectations, 1Q26 came under some pressure

In 2025, the company recorded revenue of RMB5.509bn, up 6.74% YoY; net profit attributable to shareholders of the parent company reached RMB730mn, up 20.46% YoY; net profit attributable to shareholders of the parent company excluding non-recurring items reached RMB729mn, up 22.83% YoY. In 2025, CDMO revenue maintained steady growth, the API segment was broadly flat, and profitability improved significantly. In 1Q26, the company recorded operating revenue of RMB1.201bn, down 19.43% YoY; net profit attributable to shareholders of the parent company reached RMB172mn, down 31.22% YoY; net profit excluding non-recurring items reached RMB169mn, down 32.67% YoY. The revenue decline was mainly due to the overseas patent expiry of the core client’s flagship product Entresto. The US market is expected to continue facing generic competition, which has put pressure on the company’s related CDMO business. On the profit side, the decline was larger due to a drop in gross margin and a rise in the period expense ratio.

CDMO projects continue to increase, TIDES business accelerates

For the CDMO business, the company signed 146 new projects in 2025. In 1Q26, 34 new projects were signed, up 15% YoY. As of 1Q26, the value of orders on hand was about RMB4bn. As of end-2025, among the projects undertaken by the company, 39 were commercialized projects, 94 were in Phase III clinical trials, and 1,158 were in Phase I and Phase II clinical trials. The projects cover therapeutic areas including oncology, heart failure, antiviral, central nervous system, and cardiovascular and cerebrovascular diseases. Among them, the number of innovative drug projects with NDA submissions has increased rapidly, which is expected to continue supporting steady business growth. In recent years, the company has actively expanded its market, and the number of projects from emerging clients has grown rapidly. The business in overseas markets such as Japan and South Korea has shown strong momentum and is expected to maintain relatively high growth in the coming years.

The TIDES business, as an important future growth curve for the company, is progressing smoothly. The peptide business continued to expand in scale in 2025, with more than 50 projects currently on hand. In 2026, the company plans to further strengthen the expansion of commercial production capacity to meet potential client NDA demand. Regarding the oligonucleotide technology platform, the company has completed the construction of oligonucleotide drug R&D platforms in the US and China and has undertaken multiple customized projects. At present, the company is accelerating the construction of oligonucleotide production capacity.

API segment faces short-term pressure, profitability continues to improve

In 2025, prices of some products in the API segment declined, such as carbapenem and anti-diabetic products, which still fluctuated at the bottom. Full-year revenue was basically flat. Through internal structural adjustments, gross margin showed some recovery. In 1Q26, the API segment faced sales pressure due to intensified competition in anti-infective products, but profitability continued to improve and margins still saw a slight recovery. For the generic drug formulation business, the company strengthened full-process management of API –formulation integration and rapidly advanced registration filings and commercial launch of formulation projects under development. As of the end of 2025, the formulation pipeline included 20 projects, of which 11 had been approved, while 9 had submitted marketing applications and were at different stages of review and approval.

Overall outlook for 2026: CDMO faces short-term pressure, global expansion continues to deepen

In 2026, affected by the patent expiration of major products of key clients, the company’s CDMO business is expected to face some pressure. From the operating rhythm, the impact is most evident in Q1, and CDMO operations are expected to improve quarter by quarter. Meanwhile, the company continues to expand other overseas clients. The Japan, Korea, and US markets maintain rapid growth, and some earlier projects are expected to continue to be transferred to domestic sites. New domestic CDMO plants are rapidly introduc ing late-stage projects, and several key clinical projects are expected to gradually release incremental contributions. The Tides business is advancing at an accelerated pace. Commercial peptide production capacity continues to expand, the small nucleic acid R&D platform is gradually improving, and capacity deployment is expected to accelerate in 2026.

Financial analysis: Expense ratio increased in 1Q26, gross margin faces short-term pressure

In 2025, the company’s selling expense ratio, administrative expense ratio, and R&D expense ratio were respectively 1.95%,7.15%,5.21%, YoY +0.01pct, -0.94pct, and -0.89pct respectively, with administrative and R&D expense ratios declining. In 2025, the gross margin of the company’s core business was 37.37%, up 3.38 pcts YoY; in 1Q26, the company’s selling expense ratio, administrative expense ratio, and R&D expense ratio were respectively 2.39%, 8.59%, 4.68%. Affected by the decline in revenue, the expense ratios all increased compared with the same period last year. In 1Q26, the company’s gross margin was 36.37%, slightly down from 37.42% in the same period last year. Operating cash flow RMB136mn, down YoY 52.41%, mainly due to a decrease in cash received from sales of goods.

Investment recommendation:

As a leading CDMO enterprise, the company continues to advance the strategy of “deepening” major clients and “expanding” emerging clients, achieving simultaneous improvement in both the quantity and quality of its CDMO pipeline. At the same time, it continues to increase investment in R&D and capacity building through a combination of “internal construction + external expansion”, promoting the high-quality and rapid development of the CDMO segment. We are optimistic about the company’s continued development in the CDMO field. We estimate the company’s operating revenue for 2026–2028 to be RMB5.06bn, RMB5.26bn, and RMB5.68bn, representing YoY growth of -8.1%, 4.0%, and 8.0%, respectively. Net profit attributable to shareholders of the parent company is projected to be RMB813mn, RMB944mn, and RMB1,103mn, representing YoY growth of 11.3%, 16.2%, and 16.8%, respectively. Corresponding PE ratios are 15x, 13x, and 11x. We maintain a "buy" rating.

Risks: Client concentration risk: The company has relatively high dependence on demand from a single client. A decline in client demand or product sales falling short of expectations may pose risks to the company. Order shortfall risk: The company mainly serves products such as innovative drug APIs and intermediates during the commercial sales stage of patented drugs. After innovative drugs are launched, sales volume may fall short of expectations due to factors such as market promotion and physician and patient medication habits, or patents approaching expiration may face generic competition, all of which may affect the company’s future orders. Intensified market competition risk: The domestic CDMO industry is developing rapidly and market size is expanding quickly, which may expose the company to intensified competition. Policy change risk: Domestic pharmaceutical regulatory policies have undergone significant changes. In recent years, policies such as the Marketing Authorization Holder (MAH) system, generic drug consistency evaluation, volume-based procurement, and the associated review and approval of APIs, excipients, packaging materials, and drug formulations have brought profound changes to API production. The company needs to adjust its development strategy in a timely manner according to policy changes, and there is a risk that fai lure to adapt quickly may affect operations. Exchange rate fluctuation risk: The company has a relatively high proportion of overseas business, with USD and EUR as the main settlement currencies, exposing it to significant exchange rate fluctuation risk. Overseas M&A integration risk: The company is advancing acquisitions of overseas commercial API production bases, and there is a risk that post-merger integration may fall short of expectations.