UBS: WuXi AppTec (02359) net profit for the last quarter slightly exceeded expectations, raising target price to HK$154.1.

UBS released a research report stating that based on WuXi AppTec's (02359) fourth quarter performance last year, the profit forecast has been adjusted slightly, with an increase in revenue and gross profit margin forecast. The target price has been raised from HK$153.1 to HK$154.1. Based on cash flow discounted valuation, the "buy" rating is maintained. In the fourth quarter of last year, WuXi AppTec's revenue increased by 9.2% year-on-year to 12.6 billion RMB, and net profit increased by 151.8% year-on-year to 7.4 billion RMB, with revenue meeting preliminary expectations and net profit slightly exceeding expectations. The revenue from continued operations last year increased by 21.4% year-on-year, and the adjusted gross profit margin increased by 6.6 percentage points to 48.2% year-on-year. By the end of last year, the backlog for continued operations reached 58 billion RMB, a year-on-year increase of 28.8%. In terms of business segmentation, revenue from the chemical business increased by 25.5% to 36.5 billion RMB, mainly driven by a 96% year-on-year increase in TIDES business revenue to 11.4 billion RMB, with a 20.2% year-on-year increase in TIDES backlog. Testing and biology business revenue increased by 4.7% and 5.2%, respectively. In terms of geographical segmentation, the U.S. market remained the main growth driver, with revenue increasing by 34.3% year-on-year to 31.3 billion RMB, accounting for 72%. WuXi AppTec's management expects continued operations revenue to grow by 18% to 22% this year, reaching 51.3 billion to 53 billion RMB, roughly in line with the bank's expectations and market forecasts. The target for this year is to maintain a stable and resilient adjusted net profit margin under non-international financial reporting standards, with capital expenditures of 6.5 billion to 7.5 billion RMB and adjusted free cash flow of 10.5 billion to 11.5 billion RMB. The group also announced a 2026 H-share incentive plan. If revenue reaches 51.3 billion RMB this year, up to 1.5 billion HKD in H-shares will be awarded, with an additional 1 billion HKD in H-shares if revenue reaches 53 billion RMB.