Pharmaron’s earnings growth accelerated in 3Q26, with revenue rising 20.9% YoY and non-IFRS adj. net profit attributable to shareholders increasing 24.7% YoY, outpacing the growth of 17.9% and 20.3% YoY, respectively, in 1H26. Note that the growth of adj. net profit consistently exceeded that of revenue through 2026, indicating strengthening operating momentum. New bookings of 9M26 increased by more than 30% YoY, led again by the >40% YoY growth of CDMO business. Mgmt. maintained its 2026E full-year revenue growth guidance of 15– 20% and expressed confidence in margin improvement in the near future.

Resilient demand and business momentum across all segments. 1) Laboratory services revenue grew 17.5% YoY in 3Q26 (vs 13.7% YoY in 1H26), while 9M26 bookings increased over 25% YoY, accelerating from 20%+ YoY in 1H26. Such growth was supported by complex small molecules and new modalities, including PROTACs, molecular glues, RIPTACs, conjugates, cyclic peptides and oligonucleotides, alongside deeper penetration among MNC and AI-enabled drug discovery customers. 2) 3Q26 CDMO revenue rose 30.1% YoY (vs 32.8% YoY in 1H26), with 9M26 bookings up over 40%, maintaining the strong momentum of 1H26. Latestage and commercial demand remained robust, with sizable deliveries for certain European pharma clients driving the acceleration of Top-20 customer revenue in the quarter. Mgmt. expects more high-potential programs to enter late and commercial stages with production of certain key projects already well scheduled, marking its CRDMO business model to enter a harvest phase. To accommodate the rising demand, mgmt. targeted capex to reach more than RMB3.0bn in 2026E and to remain elevated in 2027E. 3) Clinical development services revenue increased 18.0% YoY in 3Q26 (vs 14.2% YoY in 1H26), with 9M26 bookings up over 25%. Mgmt. saw an inflection in China’s clinical CRO market following intense competition since 2022.

Margin well positioned to expand down the road. We expect margins to trend upward for Pharmaron. Per mgmt., FX reduced 9M26 gross profit margin (GPM) by c.2ppts. Laboratory services’ 3Q26 GPM declined 3.4ppts YoY, primarily reflecting RMB appreciation against the US dollar. Under constant FX, the segment GPM would be stable to slightly higher, according to mgmt. CDMO GPM expanded 1.6ppts YoY and 4.5ppts QoQ in 3Q26, demonstrating benefits from a richer mix of late-stage and large-scale projects, higher utilization and more flexible production scheduling. Smallmolecule CDMO GPM exceeded 35% in 9M26, and mgmt. targets 35–40% over time, assuming successful large-project deliveries. Clinical GPM improved 2.3ppts YoY and 1.0ppt QoQ in 3Q26. China’s CRO market inflection should support further margin recovery. Collectively, these trends underpin mgmt’s goal for adj. net profit to outgrow revenue in the near future.

Maintain BUY. We expect Pharmaron’s revenue to grow by 18.3%/ 19.5%/ 17.8% YoY and non-IFRS net profit to increase by 22.8%/ 23.8%/ 19.8% YoY in 2026E/ 27E/ 28E, respectively. Our DCF-based TP remains unchanged at RMB56.00 (WACC of 9.32%; terminal growth of 2.0%; both unchanged).

Risks:

1) Lower-than-expected probabilities of success in winning late- and commercial-stage CDMO projects in the global market; 2) uncertainties in the demand recovery sustainability in early-stage R&D; 3) slower-than-expected margin recovery of clinical services; 4) geopolitical uncertainties.