Futu: Maintains a "Buy" rating on WuXi AppTec with a target price of HKD 138

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FRC (Fairview) releases a research report, saying it maintains a “Buy” rating for WuXi AppTec (02359). Based on a discounted cash flow (DCF) valuation model, the target price is HK$138; for WuXi AppTec (603259.SH), the target price remains RMB 135.

The company’s management expects 2026 revenue to reach RMB 51.3 billion to RMB 53.0 billion (same below). Revenue from continuing operations is expected to grow year over year by 18% to 22%. The adjusted non-IFRS net profit margin remains stable. Capital expenditures are expected to be between RMB 6.5 billion and RMB 7.5 billion, higher than RMB 5.5 billion in 2025. TIDES business capacity will expand to 130k liters in 2026, up from 100k liters at the end of last year. Management is confident that TIDES business revenue will achieve 30% to 40% growth. The firm believes that the company’s 2026 guidance is above market expectations, reflecting its strong capital expenditure commitments and capacity guidance.

The firm points out that WuXi AppTec’s 2025 revenue was RMB 45.5 billion, up 16% year over year; revenue from continuing operations grew 21%; and adjusted net profit reached RMB 15.0 billion, up 41% year over year. Gross margin expanded by 6.2 percentage points year over year to 47%. This was mainly driven by strong expansion in the chemical business segment. Chemical business revenue increased 26% year over year to RMB 36.5 billion. Within this, small-molecule drug discovery and development and manufacturing (D&M) revenue reached RMB 19.9 billion, up 11% year over year. TIDES business revenue increased 96% to RMB 11.4 billion. Test and biology business revenue grew 4.7% and 5.2% year over year, respectively.

As of the end of 2025, the company’s orders on hand for continuing operations were RMB 58.0 billion, up 29% year over year. Of this, the order growth rate for TIDES accelerated from 17% in the third quarter to 20%. Management said that orders for the early-stage business recorded double-digit growth. Progress on capacity expansion in the U.S. is going smoothly. The Middletown facility in Delaware will provide capacity for solid dosage forms and injectable products in 2027.

The company’s total dividend payout ratio in 2025 was approximately 35%. For 2026, the target is to maintain a 30% final dividend payout ratio and a mid-term dividend of RMB 1.0 billion.

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