Morgan Stanley has issued a research report adjusting its price target for Wuxi Apptec (HKG: 02359) H-shares from HK$155 to HK$168, reaffirming the stock as its "preferred pick" while maintaining an "overweight" rating.

For the company's A-shares (SHA: 603259), the target price has been raised from 145 yuan to 153 yuan, with the "overweight" rating also maintained.

The investment bank has increased its adjusted earnings forecasts for Wuxi Apptec for the years 2026 to 2028 by 4% to 6%, implying a projected compound annual growth rate of 16% from 2025 to 2028.

The pace of approvals for novel small molecule drugs, including TIDES, has been accelerating throughout 2025 and 2026.

As multiple blockbuster drugs are planned for launch, the propensity for multinational pharmaceutical companies to outsource development and manufacturing is on the rise, aiming to leverage China's advantages in technology, efficiency, and cost.

Morgan Stanley notes that Wuxi Apptec is at the center of this upcycle, with its portfolio of 89 commercialized contracts and 94 projects in Phase III clinical trials providing a durable and predictable revenue outlook.

The report indicates that leading indicators for China's CDMO sector, such as orders, backlog, capacity, and global supply chain development, show no signs of slowing down as time progresses.

Growth dynamics are particularly robust in late-stage development projects, which have a high manufacturing component, as well as in small molecule active pharmaceutical ingredients (APIs) and complex modalities.

Morgan Stanley anticipates that Wuxi Apptec's strong performance will persist through 2026 and 2027, with the potential for the company to raise its full-year performance guidance in the future.