Morgan Stanley expects that the stock price of Kanglong Chemical will rise in the next 30 days, as the recent pullback has made short-term valuations attractive

Morgan Stanley's research report on technology predicts that the stock price of Kanglong Chemical (03759.HK) will rise in the next 30 days, as the recent decline in the stock has made short-term valuations attractive.

The firm indicated that the company has secured a major commercial production contract with Eli Lilly (LLY.US) for the production of Orforglipron formulations in China. Eli Lilly has committed to investing $3 billion in China over the next decade, with $200 million specifically allocated for Kanglong Chemical's capacity building, and there is potential for further expansion. Orforglipron is an experimental oral GLP-1 drug used by Eli Lilly for the treatment of type 2 diabetes and obesity, with its listing application submitted to the Chinese drug regulatory authority by the end of 2025.

The firm believes that the contract is expected to accelerate Kanglong Chemical's profit growth in 2026-27, with management anticipating a profit growth of about 10% in 2025. The stock is currently trading at a forecasted price-to-earnings ratio of 14 times for 2026, and Kanglong Chemical's H shares are currently valued below its peers (over 20 times). The firm has now assigned a "Buy" rating to Kanglong Chemical's H shares, with a target price of HKD 31