Asymchem's second quarter was weighed down by project timing, while strong orders and capacity expansion support acceleration in the second half and medium-term growth

Overview

The report reviews Asymchem's 2Q26 results, order backlog, progress across innovative drug modality projects, and capacity expansion plans. Goldman Sachs believes the quarterly earnings miss mainly reflected short-term disruptions from project recognition timing, business mix, and foreign exchange. Strong orders and accelerating capital expenditure improve growth visibility beyond 2027, prompting it to lower its FY26 earnings forecast, raise its FY27-28 forecasts, and increase its A-share and H-share target prices.

Core views

2Q26 revenue was Rmb1.81bn, up 9.6% year over year but 7.8% below Goldman Sachs' estimate. The main drags were weaker-than-expected small-molecule CDMO revenue and adverse foreign-exchange effects: foreign exchange reduced 1H26 revenue by 3.1%, compared with 2.6% in 1Q26. Emerging-services revenue increased 72.5% year over year but did not fully offset delayed recognition of small-molecule projects. At constant exchange rates, overseas revenue grew only 1% year over year, while the China business grew 69%. Non-IFRS profit was Rmb301mn, down 10.6% year over year, corresponding to an adjusted net margin of 16.7%, significantly below 25.1% in 1Q26 and 20.4% in 2Q25. The margin decline reflected both an unfavorable business mix caused by delayed small-molecule CDMO revenue and a decrease in the profitability of emerging businesses from approximately 35% in 1Q26 to approximately 30%, as well as a 1.5% foreign-exchange impact on the 1H26 gross margin, versus 1.2% in 1Q26. Goldman Sachs judges that the shortfall primarily resulted from project delivery timing, similar to the situation in 3Q25, rather than deterioration in underlying demand. Management continues to maintain its FY26 revenue growth guidance of 19%-22% and expects more commercial projects to be delivered in 2H26, particularly in 4Q26. Order data provide stronger support for medium-term growth. The total 1H26 order backlog reached US$1.67bn, up 53.8% year over year, while newly signed orders grew 54.6% year over year. Orders for the chemical macromolecule business increased 163.5% year over year, and those for the biologics business grew 88.7%. Overseas customers accounted for 68.3% of the chemical macromolecule order backlog. The company is supporting 60 peptide drug projects, including 25 related to obesity; the project stages comprise 1 commercial, 8 PPQ, 13 late-stage clinical, and 23 early-stage clinical projects. Oligonucleotide projects increased to 74, including 5 PPQ, 20 late-stage clinical, and 49 early-stage clinical projects. The toxin-linker platform supports 58 projects, including 3 commercial, 9 PPQ, and 46 clinical-stage projects. Overseas business accounted for 49.2% of the biologics order backlog. The company is executing 162 projects, including 7 BLA, 4 PPQ, 64 IND, and 87 R&D services projects, and secured its first BLA order for a bispecific ADC. The report believes this project pipeline can translate into subsequent revenue as more products progress toward commercialization, particularly strengthening growth visibility for 2027. To meet demand for peptides, oligonucleotides, and biologics, management raised its FY26 capital expenditure guidance from Rmb2.1bn at the beginning of the year to Rmb2.6-2.8bn and expects FY27 capital expenditure to exceed Rmb3bn. The additional investment will primarily be used for chemical macromolecule and biologics capacity. Management is particularly optimistic about peptide opportunities: oral peptides require significantly larger API volumes than injectables, while industry capacity remains tight. Capacity expansion may cause short-term margin volatility, but management expects the long-term profitability of peptide CDMO to exceed that of traditional small-molecule CDMO due to faster demand growth, higher technical barriers, and greater scale. Accordingly, Goldman Sachs adjusted its FY26E-28E net profit forecasts by -6.4%, +3.4%, and +1.9%, respectively, reflecting a slower margin recovery in 2026 but greater optimism about growth driven by strong orders and capacity expansion in 2027-28. For revenue forecasts, FY26E was lowered from Rmb8,070.7mn to Rmb7,941.1mn, FY27E was raised from Rmb9,503.8mn to Rmb9,550.1mn, and FY28E was raised from Rmb11,170.9mn to Rmb11,207.5mn, corresponding to revenue growth of 19.1%, 20.3%, and 17.4%. EPS forecasts were adjusted from Rmb3.75, Rmb5.13, and Rmb6.18 to Rmb3.51, Rmb5.31, and Rmb6.30, respectively. Goldman Sachs expects the EBITDA margin to rise from 27.5% in FY26E to 29.3% in FY27E and 30.1% in FY28E, while the net margin is expected to recover from 15.8% to 19.8% and 20.0%. The valuation uses an unchanged 24x 12-month forward P/E. The 12-month H-share target price was raised from HK$151.20 to HK$164.90, implying 48.4% upside based on the HK$111.10 price stated in the report. The A-share target price was raised from Rmb166.50 to Rmb181.50, implying 15.9% upside based on Rmb156.57. The A-share target price is based on a 20% A-H premium relative to the H-shares. The target-price increases indicate that Goldman Sachs places greater emphasis on the medium-term growth from the order backlog and capacity expansion, while the reduced FY26 forecast preserves its view that the near-term margin recovery will be slower.

Analysis framework

Goldman Sachs first compares actual 2Q26 revenue, margins, and profit with its own forecasts and historical quarters, then attributes the differences to the timing of small-molecule project deliveries, business mix, foreign exchange, and changes in emerging-business profitability. It subsequently evaluates future revenue visibility using order backlog, growth in newly signed orders, the share of overseas orders, and the R&D and commercialization stages of different project types, while assessing long-term growth and profitability in conjunction with capital expenditure and industry capacity constraints. Finally, it lowers its FY26 earnings forecast, raises its FY27-28 forecasts, and updates the target prices using an unchanged 12-month forward P/E and A-H premium.

Methodology notes

• Industry analysis frameworkSupply-demand framework

  Analysis of order backlog, project stages, and capacity expansion

  The report measures demand using backlog and newly signed orders, assesses the pace of revenue conversion based on project progression from clinical development and PPQ to commercialization, and evaluates supply capacity using capacity constraints in areas such as peptides and the company's capital expenditure, thereby assessing medium-term growth visibility.

• Valuation methodologyP/E and PEG valuation

  12-month forward P/E and A-H premium pricing

  Goldman Sachs continues to apply a 24x 12-month forward P/E to the H-shares to derive a target price of HK$164.90, then applies a 20% A-H premium to derive the A-share target price of Rmb181.50.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Asymchem H-shares (6821.HK)

  Directly reflects the growth of Asymchem's CDMO business; Goldman Sachs assigns a BUY rating and raises its 12-month target price.

  Strengths

  Rapid growth in backlog and newly signed orders, a rich pipeline of peptide, oligonucleotide, ADC, and biologics projects, and 48.4% upside implied by the target price.

  Weaknesses

  2Q26 revenue was below expectations, while margins were affected by delayed project recognition, business mix, foreign exchange, and weaker profitability in emerging businesses.

  Comparison

  The H-share target price is calculated using a 24x 12-month forward P/E; the A-share target price applies a 20% A-H premium to this valuation.

  Risks

  Loss of key customers, pricing pressure from competition, regulatory changes and declining biotechnology financing, labor-cost and talent-retention pressures, and geopolitical uncertainty.

• Asymchem A-shares (002821.SZ)

  Represents the same company's operating fundamentals as the H-shares, with the target price reflecting a 20% A-H premium.

  Strengths

  Strong orders, expansion of innovative-drug modality businesses, and accelerating capital expenditure support medium-term growth; the target price is 15.9% above the price stated in the report.

  Weaknesses

  The near-term margin recovery is slower, while increased capital expenditure may cause temporary volatility in earnings and cash flow.

  Comparison

  The A-share target price is Rmb181.50, applying a 20% A-H premium to the H-share valuation result.

  Risks

  In addition to the common downside risks, upside uncertainties for the A-shares listed in the report include the pace of the emerging-services ramp-up and changes in GLP-1-related small-molecule orders.

Key data

• 2Q26 revenueRmb1.81bnUp 9.6% year over year and 7.8% below Goldman Sachs' estimate
• 2Q26 non-IFRS profitRmb301mnDown 10.6% year over year
• 2Q26 adjusted net margin16.7%25.1% in 1Q26 and 20.4% in 2Q25
• 1H26 foreign-exchange drag on revenue3.1%2.6% in 1Q26
• Emerging-services revenue growth+72.5% yoyPartially offset the impact of delayed small-molecule CDMO revenue
• Overseas and China business growthOverseas +1% yoy (constant currency); China +69% yoyReflects regional revenue differences caused by project delivery timing
• FY26 revenue growth guidance19%-22%Management maintained guidance and expects deliveries to accelerate in 2H26, particularly in 4Q26
• Total 1H26 order backlogUS$1.67bnUp 53.8% year over year
• Newly signed orders in 1H26+54.6% yoySupports growth visibility for 2027
• Chemical macromolecule and biologics order growth+163.5% yoy; +88.7% yoyThe main sources of order growth
• Peptide projects60Including 25 obesity-related projects, 1 commercial project, and 8 PPQ projects
• Oligonucleotide and toxin-linker projects74; 58Oligonucleotides include 5 PPQ projects; toxin-linkers include 3 commercial and 9 PPQ projects
• Biologics projects162Including 7 BLA, 4 PPQ, 64 IND, and 87 R&D services projects
• Capital expenditure guidanceFY26 Rmb2.6-2.8bn; FY27 above Rmb3bnThe original FY26 budget was Rmb2.1bn
• FY26E-28E net profit forecast revisions-6.4% / +3.4% / +1.9%Slower margin recovery in 2026 and higher growth expectations for 2027-28
• FY26E-28E EPSRmb3.51 / Rmb5.31 / Rmb6.30Previous forecasts were Rmb3.75, Rmb5.13, and Rmb6.18, respectively
• Valuation multiple24x 12-month forward P/EThe valuation multiple remains unchanged
• H-share target priceHK$164.90Previously HK$151.20; 48.4% upside relative to HK$111.10
• A-share target priceRmb181.50Previously Rmb166.50; 15.9% upside relative to Rmb156.57, based on a 20% A-H premium

Impact & implications

The report believes that delayed revenue recognition, business mix, and foreign exchange will continue to affect near-term performance but have not changed the demand trend. If commercial projects are delivered as management plans in 2H26, particularly in 4Q26, revenue growth and margins could accelerate again. The extensive innovative-drug project pipeline and capacity expansion strengthen the growth foundation for 2027-28. Meanwhile, elevated capital expenditure and the ramp-up of emerging businesses may cause short-term volatility in margins and cash flow.

Risks

• The loss of key customers could significantly affect orders and revenue.
• Domestic and global competition may create pricing pressure.
• Regulatory changes and declining biotechnology financing may weaken customer demand.
• Rising labor costs and difficulties retaining talent may affect profitability and execution capabilities.
• Geopolitical uncertainty may affect cross-border business and orders.

What to watch

• Monitor whether commercial project deliveries accelerate as planned in 2H26, particularly in 4Q26.
• Monitor whether capacity construction and ramp-up for emerging services such as peptides, ADCs, and oligonucleotides proceed faster than expected.
• Monitor whether GLP-1-related small-molecule orders increase.
• Monitor whether capital expenditure of Rmb2.6-2.8bn in FY26 and more than Rmb3bn in FY27 can be effectively converted into capacity and order revenue.