WuXi AppTec's Stellar Performance Prompts Jefferies to Sharply Raise Price Target: Qualitative Shift in Profitability

WuXi AppTec delivered a first-half performance far exceeding market expectations, marking a substantive leap in earnings quality and prompting Jefferies to significantly raise its price target.

In the first half of 2026, WuXi AppTec achieved revenue of RMB 28.9 billion, a year-on-year increase of 39%; net profit attributable to shareholders amounted to RMB 11.08 billion, up 34% year-on-year. The gross margin surged by 9.4 percentage points to 53.2%, while expense ratios narrowed concurrently, indicating a qualitative shift in the profit structure. Management subsequently raised the full-year revenue guidance from the previous range of RMB 51.3–53.0 billion to RMB 58.5–60.5 billion. This implies an increase in recurring revenue growth from 18–22% to 35–39%, far surpassing the buy-side's previously optimistic expectation of around 30%.

WuXi AppTec's shares surged more than 10% on Tuesday, closing at HKD 180.30, the highest level since September 2021.

Jefferies maintained its Buy rating on WuXi AppTec, raising the price target for A-shares from RMB 135 to RMB 165, and sharply increasing the H-share price target from HKD 138 to HKD 210, representing increases of 22% and 52%. Jefferies also raised its earnings per share (EPS) forecasts for 2026 and 2027 by approximately 39% each. Analysts believe that WuXi AppTec is a core beneficiary of the ramp-up in GLP-1 drug volumes, with high earnings visibility for 2026.

Performance Broadly Beats Expectations, Surge in Gross Margin Is Key

The highlights of WuXi AppTec's first-half performance were not limited to the scale of revenue but were also reflected in the comprehensive improvement of earnings quality. The consolidated gross margin increased from 43.8% a year ago to 53.2%, a rise of 9.4 percentage points. Specifically, the gross margin of the Chemistry segment increased by 7.5 percentage points, while the Testing segment's gross margin surged by 13.3 percentage points to 37.7%. Period expense ratios were optimized simultaneously, with selling and administrative expense ratios dropping from 7.9% to 6.8%, and R&D expense ratios decreasing from 2.5% to 2.1%.

In terms of revenue structure, the Chemistry segment remained the main engine, generating revenue of RMB 25.3 billion in the first half, a year-on-year increase of 53%. Among this, revenue from small molecule drug discovery and manufacturing reached RMB 15.0 billion, up 73% year-on-year, with 699 new molecules added. TIDES business revenue amounted to RMB 7.26 billion, a year-on-year increase of 44%, with the number of customers and molecules growing by 39% and 68%, respectively. The gross margin for TIDES improved from 48.3% to 55.8%. Revenue from the Testing and Biology segments increased by 32% and 11% year-on-year, respectively, with emerging modalities contributing over 35% of the Testing segment's revenue in the first half.

Oral GLP-1 Drives Rapid Expansion of Backlog

Oral GLP-1 drugs were the core driver behind this quarter's outperformance. In its research report, Jefferies estimated that stockpiling demand for orforglipron contributed approximately RMB 3.0 billion in revenue in the first and second quarters of this year. Management raised the full-year growth guidance for TIDES from 40% to 45%. Regarding capacity, TIDES production capacity is expected to expand to 130 kiloliters by the end of 2026, up from 100 kiloliters by the end of 2025.

Regarding the order backlog, ongoing business orders grew by 25% year-on-year to RMB 66.4 billion, accelerating further from RMB 59.8 billion at the end of the first quarter (a 24% year-on-year increase). Capital expenditure guidance was also raised, with full-year capex increased from RMB 6.5–7.5 billion to RMB 7.5–8.5 billion. Jefferies believes this signal confirms the certainty of demand for 2027.

Jefferies pointed out in its report that investors' sensitivity to geopolitical risks is declining. The United States remains WuXi AppTec's largest market, with revenue from the U.S. increasing from RMB 14.24 billion to RMB 22.28 billion in the first half, demonstrating strong business resilience.

Jefferies raised the price target for A-shares to RMB 165 and for H-shares to HKD 210, both based on DCF valuation. The weighted average cost of capital (WACC) for A-shares and H-shares was assumed to be 11.9% and 10.8%, respectively, with a terminal growth rate of 3.0% for both. According to Jefferies' report, analysts David Shang, Cui Cui, and others simultaneously raised their revenue forecasts for 2026 and 2027 by approximately 19–20%, and EPS forecasts by approximately 39%.