Pharmaron reported 1Q26 results, with revenue growing 15.5% YoY to RMB3.58bn and adj. non-IFRS attributable net profit increasing 16.2% YoY to RMB406mn. 1Q26 revenue/ adj. net profit accounted for 21.8%/ 18.8% of our fullyear estimates, largely in line with historical ranges. New orders in 1Q26 surged over 30% YoY, a significant acceleration from the 14% YoY growth recorded in 2025. Mgmt. maintained full-year revenue growth guidance of 12%-18%.

Demand accelerated in 1Q26. Total new orders grew by >30% YoY in 1Q26, including >20% and >50% YoY growth for lab services and small molecule CDMO, respectively, both significantly outpacing their 2025 growth rates. This encouraging order momentum was primarily driven by: 1) Successful strategic expansion with MNC clients, with 1Q26 revenue from Top 20 global pharmaceutical companies soaring 47.98% YoY; 2) A recovery in domestic demand, as revenue from Chinese clients grew 43.4% YoY, coupled with a strong out-licensing trend where Pharmaron has been playing a critical role; 3) Continued rapid revenue growth from new modalities; and 4) The signing of a major DP (Drug Product) contract in the small molecule CDMO segment, alongside the progression of other pipeline projects into later stages.

Strong demand in small molecule CDMO. The segment generated revenue of RMB866mn in 1Q26, up 25.0% YoY, significantly outperforming other segments. Notably, the Company secured a commercial DP contract for Eli Lilly's oral small molecule GLP-1 drug, Orforglipron, in 1Q26. Serving over 1,000 projects annually with a broad coverage of promising targets and molecules, Pharmaron is well-positioned to capture major manufacturing orders in the future. As current capacity is highly utilized, the Company will continue to advance the PhII construction at Shaoxing site and plan for new capacity expansions. Mgmt. expects capex for 2026 to be ~RMB3.0bn (+12.4% YoY), with a strategic focus on bolstering CDMO capacity for latestage projects and new modalities. Based on current demand and capacity planning, mgmt. expects the small molecule CDMO segment to consistently outpace the Company’s overall growth in the coming years.

Clinical services targeting loss reduction this year. Revenue from clinical services increased by 11.8% YoY, accelerating from the 7.1% YoY growth in 2025. However, segment GPM came in at 7.1% in 1Q26, down 4.7ppts YoY, primarily due to revenue mix changes and pricing competition in China market. Regarding new orders, SMO pricing has shown recoveries, while CRO price pressure has moderated compared to last year. Nevertheless, given the long conversion cycle of clinical programs, the Company is still executing low-priced orders secured last year. Mgmt. expects the segment to remain in a loss-reduction phase throughout 2026, with performance likely to improve next year as higher-priced orders set to be converted into revenue.

Maintain BUY. Our DCF-based TP is maintained at RMB39.00 (WACC of 9.32%; terminal growth of 2.0%; both unchanged). We forecast Pharmaron’s revenue to grow by 16.5%/ 16.2%/ 14.9% YoY and adj. net profit to increase by 18.8%/ 17.8%/ 16.1% YoY in 2026E/ 27E/ 28E, respectively.