The Zhitong Finance App learned that BOC International released a research report stating that it will maintain Kanglong Chemical's (03759) “buy” rating and key industry recommendations. Based on strong order performance, the bank raised its 2026-28 adjusted net profit forecast by 1-6%. The bank maintains a target price of HK$46.6/RMB 64.1 for H shares/A shares (300759.SH) and a purchase rating. Considering that the company is about to enter the key inflection point of the CRDMO model and the current extremely attractive valuation level (the current stock price of Hong Kong stocks corresponds to 16 times/0.5 times the 2027 price-earnings ratio/PEG).
The main views of BOC International are as follows:
Revenue growth accelerated in 3Q26, and all sectors recorded strong performance
3Q26's revenue and adjusted net profit were +21%/25%, respectively. By sector: 1) Laboratory service revenue was +18% (vs. 2Q 14%). Among them, the share of biological sciences continued to increase, and the 3Q acceleration was more obvious. Gross margin was affected by the exchange rate -3.4 ppts to 39.1% year over year. 2) CDMO service revenue was +30% year over year, and the scale effect drove gross margin to overcome the adverse effects of exchange rates, +1.6 ppts to 31.1% year over year. 3) Clinical research service revenue +18% (vs. 2Q 16%), and gross margin increased 2.3 ppts to 13.1% year over year. Management expects the trend of improving growth and profit margins on a quarterly basis throughout the year. Looking at the customer structure, revenue from mainland China was +39% in 1-3Q, continuing to outperform North America and Europe by 10%/30%; revenue from the top 20 global pharmaceutical companies was +53%, mainly driven by the delivery of post-MNC CDMO projects in Europe. The increase in MNC customer contribution (1-3Q26 23% vs. 20% in 2025) further enhances future order sustainability. Management maintains the 15-20% revenue growth guide for the whole year and is confident that it will be implemented.
Orders and production capacity expand simultaneously, and the CRDMO model will reach an inflection point
The company's new orders increased by more than 30% year-on-year in the first three quarters, providing solid support for subsequent performance growth. Among them: 1) Laboratory services increased 25% +, further accelerated from the first half of the year, mainly driven by deepening MNC strategic customer cooperation, new molecular type business expansion, and growth in AIDD demand. 2) New orders for CDMO services increased by 40% + in the first three quarters, mainly benefiting from the continuous advance of small-molecule CDMO pipelines, mid- and post-clinical and commercial production requirements; as potential major projects enter the later stages and commercialization stages, the future sector's revenue growth is highly certain. 3) New clinical CRO orders increased 25% + year over year, and overseas clinical, Chinese CRO, and SMO orders all increased significantly. Management expects capital expenditure to exceed 3 billion yuan for the full year of 2026, and high investment will be maintained next year, mainly for: 1) CDMO production capacity expansion to match more late-stage projects; 2) new laboratory expansion and talent reserves to support the continued rapid growth of the laboratory sector and help the transformation of more small molecules and new molecule businesses to CDMO.