Golden Finance News | Morgan Stanley released a report stating that PHARMARON (03759) has shown a strong new Order trend in the first two months before the fourth quarter of 2024, similar to the more than 25% year-on-year new Order growth in the third quarter, due to the smooth progress of the CMC project and the steady recovery of laboratory services. Based on this, it is expected that revenue will grow by 10% year-on-year in the second half of 2024, and the target of approximately 1.6 billion yuan adjusted Net income for the entire year is still expected to be achieved.

Looking ahead to 2025, the bank expects PHARMARON to achieve double-digit revenue growth, and profit margins will also moderately improve, with a turnaround in profitability expected in the first half of 2025. Company management stated that capital expenditures in 2025 should be lower than about 2 billion yuan in 2024. However, due to the lack of large projects landing in the foreseeable future, overseas Business may continue to incur losses.

The bank believes that the risk of PHARMARON being affected by tariffs is limited, as its core Business mainly focuses on pre-commercialization stage projects, and the final volume of cross-border Transportation of Pharmaceuticals is not large. Given its solid Order trend and reasonable valuation, Morgan Stanley reiterated its "Shareholding" rating on PHARMARON Listed in Hong Kong, using a weighted average cost of capital (WACC) of 10.5% and a terminal growth rate of 3.0%, with a Target Price of 24.20 Hong Kong dollars.

Upside risks include domestic Orders recovering with an improved financing environment, strong overseas demand brought about by easing geopolitical pressures, increases in the scale of future Orders and profit margins, as well as contributions and improved margins from emerging Business units; downside risks include further losses in overseas Business, project delays and extended Order confirmation/reservation cycles, intensified domestic competition, and geopolitical and MMF risks.