WuXi Biologics (WuXi Bio) reported 1H25 revenue of RMB9.95bn, up by 16.1% YoY. During the period, adj. attributable net profit came in at RMB2.39bn with YoY growth of 6.2%. Revenue in 1H25 accounted for 46.6% of our full-year forecast, exceeding the historical average of ~43%. However, adj. attributable net profit represented 42.9% of our full-year estimates, falling short of the historical average of ~50%. The solid performance in 1H25 was primarily driven by robust growth from both the pre-IND and late-stage/commercial services, reflecting strong and growing customer demand. In 1H25, the Company added record-high 86 new projects, 70% of which involve complex modalities such as ADCs and bispecific antibodies. As of 1H25, the Company's backlog grew 18.9% YoY to US$20.34bn, returning to positive growth territory. On the back of strong demand, mgmt. raised its full-year guidance, and now expecting revenue growth of 14- 16% YoY (up from 12-15%) and continued improvement in net profit margin.
　　Late-stage demand demonstrated encouraging momentum. Revenue
　　from PhIII and commercial manufacturing services grew by 24.9% YoY in 1H25, an impressive rebound compared to +12.8%/-3.2% YoY growth in 2023/24. In 1H25, WuXi Bio added five PhIII projects (including two transferred from external sources) and three commercial-stage projects (all internally developed). With continued progress in the Company’s pipeline and a record number of PPQ projects, we believe commercial-stage revenue will continue to grow at a rapid pace. PPQ is a regulatory prerequisite for commercial manufacturing, and serves as a key leading indicator of commercialization demand. Specifically in 1H25, the Company completed 12 PPQ projects and expects to finish 25 in 2025, representing a 56% YoY increase. Based on current project advancement, mgmt. expects the number of PPQ projects to reach 27 in 2026. To support the anticipated upcoming commercial production, WuXi Bio plans to maintain high intensity of capex investment, with capex target of RMB5.3bn for 2025 and around RMB6bn annually in the coming years.
　　Margin expansion on the horizon. WuXi Bio’s GPM improved by 3.7ppts YoY and 0.2ppts QoQ to 42.73% in 1H25, driven by faster growth in the high- margin pre-IND services, steady increases in utilization rates at domestic facilities, ramp-up of overseas capacity, execution of the WBS Strategy, and reduced cost of share-based compensation. Notably, the Company’s flagship overseas facility in Ireland successfully completed four PPQ runs and recently secured its first EMA-approved commercial project. Specifically, mgmt. expects the Ireland facility to reach GPM breakeven in 2H25. Looking ahead, mgmt. sees the Company’s overall GPM to reach 50% within three years, approaching the peak seen during the pandemic.
　　Maintain BUY. To reflect the positive demand trend, we raise our DCF-based TP from HK$30.94 to HK$35.60 (WACC: 9.32%, terminal growth: 2%). We forecast WuXi Bio’s revenue to grow by 15.3%/ 18.4%/ 17.9% YoY and adj. attributable net profit to increase by 7.6%/ 28.8%/ 18.9% YoY in 2025E/ 26E/ 27E, respectively.