Summary of Asymchem (6821.HK) Earnings Call Company Overview - **Company**: Asymchem (6821.HK) - **Industry**: Small molecule Contract Development and Manufacturing Organization (CDMO) - **Rating**: Buy - **Price Target**: HK$96.60 (12-month target) - **Current Price**: HK$91.40 - **Upside Potential**: 5.7% for H shares, 24.4% for A shares Key Financial Highlights - **2Q25 Revenue**: Rmb1.65 billion, representing a year-over-year increase of 27.5% and a quarter-over-quarter growth of 6.9% [2][3] - **Recurring Net Profit**: Rmb261 million, up 34.3% year-over-year, with gross margin improving to 44.2% [2] - **Backlog**: Total backlog reached US$1.09 billion as of 1H25, consistent with US$1.05 billion at the end of 2024 [2] - **Full-Year Revenue Guidance**: Raised to 13-15% growth, indicating 2H25 growth of 7-11% on a higher base [2] Regional Performance - **Europe Revenue Growth**: Surged by 210.4% year-over-year in 1H25, driven by enhanced business development efforts [2] Capacity Expansion - **Peptide Capacity**: Expansion from 30kL in 1H25 to 44kL by year-end, aligning with competitors like WuXi AppTec [2] - **Capex Increase**: Management revised capex upward from previously higher than Rmb1.13 billion for 2024 to support capacity expansion [2] Market Reaction - **Share Price Decline**: Despite solid 2Q25 results, Asymchem's share price fell by 7-8% on August 26, attributed to a flat backlog and profit-taking among investors [3] Emerging Business Segment - **Sales Growth**: Emerging business segment sales reached Rmb430 million, up 33% year-over-year, with a gross margin of 49.8% [18] - **Order Backlog**: Grew 40% year-over-year in 1H25, with expectations for further margin improvement [18] Risks and Challenges - **Key Risks**: Include loss of key clients, pricing pressure, regulatory risks, rising labor costs, and exposure to US-China trade tensions [22] Valuation and Forecasts - **Revised Profit Estimates**: FY25e-27e net profit estimates increased by 1.0%, 3.5%, and 2.4% respectively, reflecting growth and margin improvements [18] - **Valuation Metrics**: Target prices based on a 2027 discounted P/E with an exit P/E of 22x, and a projected EPS CAGR of 15% from 2025 to 2027 [22] Conclusion - Asymchem is well-positioned to capitalize on the growing trend of global CDMO outsourcing to China, supported by its technology leadership and established relationships with major biopharma companies [21]