Pharmaron reported 2025 financial results, with revenue growing by 14.8% YoY to RMB14.10bn, and non-IFRS adj. net profit increasing by 13.0% YoY to RMB1.82bn. Both revenue and profit growth meaningfully accelerated compared to 2024. The Company's 2025 revenue and adj. net profit came in 0.5% and 0.7% higher than our estimates, respectively, aligning with our expectations. Looking ahead, mgmt. expects revenue to grow by 12-18% YoY in 2026. It is worth noting that this guidance incorporates a negative impact of 3ppts from FX.

Global customer demand continued to expand. Driven by the penetration of strategic clients within the lab services and deliveries of CDMO projects, revenue from global Top20 pharma clients surged by 29.4% YoY, far exceeding the Company's overall growth. Similarly, revenue from European clients grew by 27.4% YoY, also well above the Company’s average, primarily driven by effective go-to-market strategies and steady advancement of CDMO pipeline. Newly signed orders increased by over 14% YoY, extending the robust growth trend following a >20% YoY increase in 2024. As the core business, lab services saw its new bookings grow by ~12% YoY in 2025. Meanwhile, small molecule CDMO also showed encouraging momentum, delivering ~13% YoY growth in new orders. During the year, the segment added 24 PhIII and 15 PPQ & commercialization projects, continuously elevating its commercial manufacturing potential going forward. Furthermore, the growth of new orders in clinical development segment outpaced the Company’s average, indicating a stabilization and early recovery in clinical demand from domestic clients and the Company's expanding market share.

Pivotal breakthroughs in small molecule CDMO commercial services. In Mar 2026, Pharmaron announced a commercial DP agreement with Eli Lilly for the oral GLP-1 drug, Orforglipron, a potential blockbuster. Under this agreement, Eli Lilly will invest US$200mn in Pharmaron to support the buildout of technical capabilities, with the potential to further expand collaboration scope. The milestone partnership will not only generate significant incremental revenue in the future (despite limited contribution for 2026), but also signifies that Pharmaron's CDMO platform fully complies with the stringent quality systems of top-tier pharma companies. Consequently, this will serve as a powerful endorsement for Pharmaron to continuously expand in global market. Beyond the breakthrough in DP services, Pharmaron's CDMO business has also established its commercial API capabilities. Its API facilities in Shaoxing and Ningbo have both passed the FDA inspections, while its first innovative API project in the US was approved in 4Q25. Given the DP partnership with Eli Lilly and other pipeline advancements, we expect the small molecule CDMO business to grow at a faster pace than the Company's other business lines over the next three years.

Maintain BUY. We raise our DCF-based TP from RMB38.08 to RMB39.00 (WACC of 9.32%; terminal growth of 2.0%), to reflect a more positive trend of global demand on R&D and manufacturing outsourcing. We forecast Pharmaron’s revenue to grow by 16.4%/ 15.9%/ 14.9% YoY and adj. net profit to increase by 18.7%/ 17.7%/ 16.5% YoY in 2026E/ 27E/ 28E, respectively.