The Zhitong Finance App learned that UBS released a research report saying that Yao Ming Kangde (02359)'s third-quarter results once again beat expectations and raised guidelines, raising the target price from HK$243.9 to HK$255.9, reaffirming the “buy” rating, and maintaining the company's first choice for the CRO sector.
Yao Ming Kangde's revenue for the third quarter of 2026 was RMB 16.6 billion (same below), up 38% year on year and 1.1% from quarter to quarter, higher than the bank and market expectations; recurring revenue increased 43.5% year on year. Net profit attributable to shareholders was 8 billion yuan, up 128.6% year on year and 23.6% quarterly, roughly in line with the bank's expectations of 8.5 billion yuan and higher than market expectations of 7.2 billion yuan. Adjusted non-IFRS net profit was 6.8 billion yuan, up 61.3% year on year, higher than the bank's forecast of 6.2 billion yuan. Adjusted gross margin expanded by 4.9 percentage points year over year. By the end of the third quarter, ongoing business orders were 76.7 billion yuan, up 36.4% year on year. The growth rate was further accelerated from 25.2% at the end of the second quarter, providing good visibility for revenue growth in 2027.
The bank pointed out that small-molecule CDMO and TIDES revenues are still the main growth drivers. Chemical business revenue increased 48.6% year over year to 14.4 billion yuan, of which small molecule development and production revenue increased about 55% year over year to 8.6 billion yuan; TIDES revenue increased 52% year over year to 4.3 billion yuan. Management raised the 2026 year-on-year growth guide from 45% to about 47%. Revenue from testing business increased 32.7% year on year to 1.4 billion yuan; revenue from biological business increased 14.4% year on year to 800 million yuan. The company further raised its overall revenue guidance for 2026 to 61 billion yuan to 61.9 billion yuan, raised the year-on-year growth guide for continuing business revenue to 40% to 42%, and maintained the adjusted non-IFRS net margin resilient guidelines; the capital expenditure plan was revised to 8 billion to 8.5 billion yuan, and the adjusted free cash flow guidelines were raised to 14.5 billion yuan to 15.5 billion yuan.
The bank raised its revenue and gross margin forecast for 2026, reflecting higher confidence in small molecules CDMO and TIDES, and raised capital expenditure assumptions, increasing the 2026-2028 earnings forecast per share by 1% to 7%.