Goldman Sachs: Raises Pharmaron target price to HKD 30, last quarter's revenue slightly exceeded expectations

According to the Zhitong Finance APP, Goldman Sachs released a research report stating that the net profit forecasts for Pharmaron (03759) for the years 2025 to 2027 have been slightly reduced by 0.1%, 0.1%, and 0.5%, respectively. The rating for Pharmaron's H shares is "Buy," while the rating for its A shares (300759.SZ) is neutral. Based on a rolling valuation benchmark, a three-year forward price-to-earnings ratio of 22 times (up from 21 times) and a discount rate of 10.5% are used, assuming a three-year compound annual growth rate of earnings of 15% (up from 14%). The target price for H shares has been raised from HKD 26.6 to HKD 30, and the target price for A shares has been raised from RMB 36.6 to RMB 38.5. The target price for H shares is calculated based on a 50% A-H premium. Goldman Sachs stated that Pharmaron's revenue in the third quarter was RMB 3.65 billion, a year-on-year increase of 13.4% and a quarter-on-quarter increase of 9.1%, slightly higher than Goldman Sachs' original expectation of RMB 3.48 billion. The revenue growth was mainly driven by the continued momentum in the CMC and biosciences sectors, with an increased contribution from the top 20 pharmaceutical clients. The non-IFRS adjusted net profit margin improved to 12.9%, compared to 11.3% in the first quarter and 12.2% in the second quarter, benefiting from improved utilization and operational leverage. The report cites Pharmaron's management raising the full-year revenue growth guidance from a year-on-year increase of 10% to 15% to 12% to 16%, indicating a year-on-year growth of 6% to 20% in the fourth quarter. It is expected that the profit margin in the fourth quarter will further improve compared to the first three quarters, but due to the profit margin dilution caused by the release of new capacity in the first quarter, the full-year non-IFRS profit margin may be slightly lower than in 2024. Management remains confident in achieving the revised guidance, pointing out strong growth in CMC orders, continuous capacity expansion, and improvement in core business profit margins. Continued investment and strategic acquisitions in the biopharmaceutical field will consolidate Pharmaron's sustained growth and leadership position in the CDMO sector