Huatai Securities: Well-positioned CXO sector is expected to see a Davis double-hit of performance and valuation in the future.

Huatai Securities research report stated that external disturbances in the CXO industry have marginally improved, accompanied by overseas interest rate cuts, domestic recovery, and industrial upgrading as triple drivers, the industry has initiated a new round of high business cycle. Some investors in the market believe that the advantage of domestic CXO companies in the field of new molecules is not yet evident. In contrast to the market, Huatai Securities detailed in the report the important opportunities for industrial upgrading for the Chinese CXO industry, analyzing the broad outsourcing potential of new molecules such as peptides, ADCs, and oligonucleotides in the subsequent commercialization stage. Export-oriented CXOs have gradually emerged from a downturn in the second half of 2024, with orders and revenue doubling year-on-year in the first to third quarters of 2025, driven by US rate cuts and new molecule orders with continued potential for acceleration; demand-oriented CXOs, after experiencing concentrated price reductions in 2023-2024, have currently seen an increase in order quantity and stable prices, with the revenue side expected to gradually see the light in 2026. Huatai Securities is optimistic about the future performance and valuation of the CXO sector, expecting a double-click in terms of performance and valuation, recommending leading players with a focus on new molecules and export orientation.