Lyon: WuXi AppTec (02359) is the preferred choice for China Meheco Group in the CRO or CDMO industry and is expected to outperform its competitors this year.

The report released by Lyon stated that looking ahead to 2026, it is believed that for the Chinese medical sector, profit delivery will be more important than valuation expansion. It is expected that Wuxi AppTec (02359) will outperform its peers. The firm has designated Wuxi AppTec as the top choice in the Chinese CRO (Contract Research Organization) / CDMO (Contract Development and Manufacturing Organization) industry. The firm maintains Wuxi AppTec's "outperform the market" rating with a target price of 143.4 Hong Kong dollars. Wuxi AppTec reported a 9% growth in revenue in the fourth quarter of 2025, a 36% year-on-year increase under Non-IFRS, exceeding market expectations by 2% and 3% respectively. The firm believes that this better-than-expected performance is mainly due to the company's strong integrated "Contract Research, Development and Manufacturing Organization" (CRDMO model), the strong growth of TIDES (oligonucleotides and peptides) business, and China's competitiveness in the global small molecule supply chain. With the valuation of the Chinese medical sector already significantly restored over the past year, the firm believes that the stock price drivers for 2026 will depend more on profit realization than valuation expansion. Compared to its peers, Wuxi AppTec has stronger visibility in profit growth. Its order backlog in the first three quarters of 2025 increased by 41% year-on-year, far exceeding the global average of about 14%, and despite the continued geopolitical risks, it has maintained strong growth momentum. The firm expects Wuxi AppTec's order growth rate to continue leading its global peers in 2026. In addition to strong order growth, Wuxi AppTec's return on equity from 2023 to 2025 has also been consistently higher than its global peers, showing its strong competitive advantage in the global pharmaceutical outsourcing market (consensus forecast for ROE in 2025 is 24%, while global peers range from 6 to 16%). The firm maintains its earnings forecast for 2025 to 2027 unchanged, and is confident that Wuxi AppTec's adjusted net profit under Non-IFRS will achieve high double-digit growth in 2026, surpassing market expectations by approximately 15%.