Investment Rating - The report upgrades Tigermed-A to Buy from Sell, with target prices increased to Rmb67/HK$73 from Rmb34/HK$37 [3][10] - WuXi AppTec and WuXi Bio are identified as top picks in the CDMO sector, expected to report beats in 1H25 [10][11] Core Insights - The CXO sector in China's healthcare is gaining attention due to improving fundamentals, attractive valuations, and growth in orders backlog [1] - WuXi AppTec is projected to beat its FY25 guidance, supported by strong growth in orders backlog and strategic disposals [2][11] - Tigermed is expected to benefit from innovative drug development and increasing out-licensing activities, leading to stronger revenue growth [3][10] Summary by Sections Top Picks in CDMO Sector - WuXi AppTec and WuXi Bio are favored for their potential to outperform in 1H25, with Tigermed-A also upgraded due to increased clinical trial activities [10] 1H25 Results Preview - WuXi AppTec's 1H25 results are expected to exceed consensus, driven by strong TIDES business and asset disposals [11] - WuXi Biologics and WuXi XDC are also anticipated to report revenue beats [11] Backlog vs. Revenue Growth - WuXi AppTec's backlog growth accelerated to 47% year-on-year in 1Q25, indicating potential revenue growth acceleration [5][48] - Tigermed's backlog grew 12% year-on-year in 2025, suggesting a positive revenue outlook [34] Global Biotech Funding - Overseas innovative drugs' primary market financing rose 28% year-on-year in 2024, with expectations for recovery in 2H25 [44] Company-Specific Insights - WuXi AppTec's management projects revenue to reach Rmb41.5-43.0 billion in 2025, with a focus on profitability improvements [47] - Tigermed is positioned as a key beneficiary of China's drug innovation, with expected revenue growth driven by clinical trial activities [3][10]

Investment Rating - The report assigns a "Buy" rating to several companies including Asymchem, Weigao, AngelAlign, and Hygeia, while Tigermed is rated as "Neutral" [28]. Core Insights - The momentum in the CDMO sector continues into Q2 2025, with a focus on opportunities arising from China biotech licensing and GLP-1 developments, although revenue potential remains unclear due to technical complexities [2][10]. - The MedTech and Services sectors are experiencing a muted recovery, with ongoing policy headwinds affecting pricing and volumes, but some companies are showing resilience through new product launches and overseas expansion [3][14]. Summary by Sections CDMO/CRO - Q2 order momentum has sustained from Q1, with most companies reporting qualitative trends, while quantitative updates are expected in July/August [9]. - Top-tier CDMOs derive only 10-20% of their revenue from China, limiting the earnings impact from recent biotech licensing deals [2][9]. - Asymchem is favored for margin improvement in FY25, driven by emerging services, particularly in obesity-related modalities [2]. MedTech & Services - Recovery in device and service volumes remains subdued, with DRG/DIP reforms continuing to pressure pricing and volumes, though minimally invasive surgeries are less affected [3][14]. - Weigao is highlighted for its attractive valuation and new product contributions, while AngelAlign is on track for global expansion [3][14]. - Surgical volumes showed mild recovery in 1H25, with expectations for stronger growth in 2H due to easing policy headwinds [14][16]. Services - Ongoing reimbursement and regulatory pressures are challenges, but there are signs of improvement in reimbursement efficiency [17]. - Companies like Gushengtang are shifting towards self-pay services to align with rising demand from the "silver economy" [20]. - M&A sentiment is improving, with companies like Hygeia exploring partnerships for capacity expansion [20]. Guidance - WuXi Apptec expects FY25 revenue growth of 10-15%, while Asymchem anticipates double-digit growth alongside margin improvements [21]. - Weigao projects FY25 revenue growth of 10-15%, and Gushengtang aims for over 25% growth [21].