[Broker Focus] Jiao International maintains a “Buy” rating for Kanglong Chemical (03759), indicating that the core business is expected to continue its strong performance.

Jinwu Financial News | CICC Research reports indicate that Kanglong Chemical (03759)2025 full-year revenue / adjusted net profit increased by 14.8% / 13.0%, respectively, positioning it in the high end of previous guidance and earnings forecast ranges; among them, Q4 2025 increased by 15.9% / 18.0%, further accelerating compared to Q3 2025. Looking at the segments: 1) Laboratory services and small molecule CDMO grew 17.9% / 17.6% in Q4 2025, with annual new contract signings up 12% / 13% year-on-year. The gross margin of small molecule CDMO continued to improve each quarter to 37.8%. In Q1 2026, a commercial production agreement for oral GLP-1 formulations was signed, which is expected to become an important growth engine in 2027 and beyond. 2) Large molecule / CGT revenue surged 43% in Q4 2025. Liverpool gene therapy CDMO services benefited from integrated project delivery, reaching a new annual revenue high, effectively offsetting the short-term profit margin impact of Ningbo large molecule capacity expansion, with the overall sector loss rapidly narrowing. 3) Clinical services saw some pressure on revenue and gross margin in Q4 2025, mainly due to industry consolidation and price competition, but the number of service projects further increased compared to the end of H1 2025, reflecting Kanglong’s growing clinical brand influence and competitiveness. The company expects 2026 revenue to grow by 12-18% (considering a potential negative impact of about 3 percentage points from RMB appreciation), with room for improvement in CDMO gross margins.

In laboratory services, biotech scientific revenue grew nearly 20% year-on-year (high teens), outpacing laboratory chemistry (about 10%), further increasing the segment’s contribution to total revenue to over 56%. Within biotech sciences, new molecular service project revenue share rapidly increased to around 15%, benefiting from efficient cross-platform collaboration, AI, and automation technologies that improve overall efficiency and accuracy. CDMO business is also rapidly enhancing its production and service capacity for new molecular types, including: 1) Early clinical conjugation manufacturing workshops are already in use, with mid-to-late clinical and commercial conjugation and formulation capacity under construction; 2) A larger-scale peptide API solid-phase synthesis workshop will be completed in 2026, better positioned to handle downstream orders in high-growth sectors like weight reduction and metabolism.

Based on the upward revision of the 2026-27 profit forecasts by 1-2% in the 2026 guidance, and continuing to value the company using exit valuation discounting and a 21x target exit P/E multiple, the target price is maintained at HKD 32.5 / RMB 47.3, with a buy rating.