J.P. Morgan: Tigermed’s order recovery accelerates, but gross margin improvement will take time

How fast are orders recovering?

Management said net new orders rose 25%–30% year on year in the first three quarters of 2026, with newly signed contracts totaling approximately 8.5 billion yuan; the company expects full-year order growth to significantly exceed the 20% target set at the start of the year.
Prices for new contracts continued to improve quarter on quarter in the third quarter, and early-stage clinical projects accounted for a greater share of orders. The overseas business development team formed in August also began converting opportunities into contracts from September to October.
JPMorgan believes orders are growing faster than revenue, providing better visibility into growth in 2027; when orders translate into earnings, however, depends on the pace of project execution.

Third-quarter revenue was 2.08 billion yuan, up approximately 17% year on year; net profit excluding non-recurring items was 172 million yuan, up 50% year on year. Management estimated that revenue growth would have been approximately 13.5% excluding newly added reimbursable project costs, below the reported 17.4%.
Third-quarter gross margin fell to 27.0% from 28.4% in the second quarter. Management attributed the decline to higher reimbursable costs and seasonal hiring of new graduates; low-priced legacy contracts also continued to weigh on clinical services profitability.
JPMorgan expects price increases to support gross margin gradually as new projects replace old contracts; the share of lower-margin SMO business also affects profitability.

Management said AI-related spending in the first three quarters was approximately 100 million yuan and expects full-year spending to exceed the initial budget. The company aims to raise clinical monitor productivity by 30%, but broader use of AI in registrational clinical trials remains constrained by regulatory and implementation conditions.
Recurring net profit rose 38% year on year to 450 million yuan in the first three quarters, and operating cash inflow was 771 million yuan; over the same period, fair-value losses on investments of 597 million yuan drove a reported net loss of 272 million yuan.

The bank raised its revenue forecasts for 2026 and 2027 by 1% each, while slightly lowering its gross margin assumptions. It expects gross margin of 27%–32% in 2026–2028.
JPMorgan maintained its underweight rating on the A-shares and neutral rating on the H-shares, with December 2027 price targets of 44 yuan and HK$44, respectively. Its assessment remains cautious, balancing the improved demand outlook against the absence so far of a sustained gross margin recovery.