Profit beat expectations, so why is revenue still in focus?

  • In the third quarter of 2026, Asymchem reported revenue of 1.788 billion yuan, up 24.0% year on year but 12.9% below Morgan Stanley’s forecast. Net profit was 332 million yuan, up 81.5% year on year and 7.5% above the bank’s forecast. Revenue and profit diverged in their performance relative to expectations.
  • Excluding non-recurring items, third-quarter profit was 203 million yuan, up 25.7% year on year, markedly below the 81.5% growth rate of net profit. The sharp increase in net profit was therefore not matched by an equivalent increase in profit excluding non-recurring items; revenue and the latter measure should be considered when assessing operating growth.

Why does the full-year revenue target depend so heavily on fourth-quarter deliveries?

  • Revenue rose 16.5% year on year in the first three quarters, and the company maintained its full-year growth guidance of 19%–22% in renminbi terms. This means the fourth quarter must lift the full-year growth rate. Management believes existing orders on hand are sufficient to support the target, but foreign-exchange headwinds persist.
  • Delivery schedules provide concrete support: about 40% of revenue from the chemical and biological macromolecule businesses is scheduled for delivery in the fourth quarter. In addition, disruption from natural factors in August delayed delivery of some small-molecule projects at the Northeast China base, making the timing of order conversion into revenue especially important.

What growth signals do orders and the business mix offer?

  • The value of new orders signed in the first three quarters rose more than 50% year on year, with third-quarter orders up 30% year on year. Order growth provides a foundation for subsequent deliveries, but the third-quarter growth rate was lower than the cumulative rate for the first three quarters; the strong cumulative growth cannot be extrapolated directly to every quarter.
  • Revenue growth was also uneven: revenue from the small-molecule CDMO business rose only 3.6% in the first three quarters, while the emerging chemical and biological macromolecule businesses grew 50.2%. Emerging businesses grew faster, while growth in the traditional small-molecule business was relatively modest.
  • Customer performance also diverged by geography: revenue from domestic customers rose 42.8% year on year in the first three quarters, while revenue from overseas customers grew 11.6% at constant exchange rates. The measures differ, but domestic customer growth was noticeably faster.

How does capacity expansion connect with the next phase of growth?

  • The company’s overall capacity utilization remained high. It invested 1.4 billion yuan in capital expenditure in the first three quarters, with a full-year budget of 2.6 billion–2.8 billion yuan and planned investment of 3 billion yuan in 2027. The company expects faster revenue growth in 2027, making the alignment of capacity expansion with subsequent project demand an important condition.
  • Peptide solid-phase synthesis capacity is progressing toward a year-end target of 69 thousand liters, with further expansion also being planned. The project base comprised 1 commercial project and 8 process performance qualification (PPQ) projects as of the first half of 2026; these projects are at different stages and cannot all be treated as commercial revenue.
  • Morgan Stanley maintained its Equal-weight rating and an A-share price target of 165 yuan, implying approximately 13% upside from the 23 October closing price. The bank also identified changes in the project mix, redundant capacity, competition and business expansion as sources of margin pressure: whether increased capacity translates into profit depends on securing projects and utilization.