Daiwa has initiated coverage on Pharmaron (HKEX: 03759) H-shares with a 'Buy' rating and a target price of HK$25.5.

The firm believes Pharmaron stands to benefit from a recovery in global biopharma funding and the ongoing outsourcing demand from multinational pharmaceutical and biotech clients.

The company's laboratory services business maintains a robust growth trajectory. Given the strong growth in new contract signings in the first quarter, Daiwa expects revenue growth for this segment to reach 13% to 15% from 2026 to 2028.

Concurrently, the Chemistry, Manufacturing, and Controls (CMC) business is progressing towards commercialization and is set to become a key growth driver in the short to medium term, with an anticipated compound annual growth rate of 24% from 2026 to 2028.

Daiwa noted that with new contract signings in the first quarter increasing by over 30% year-on-year and a solid first-quarter performance, the company is believed to be on track to achieve its guidance of 12% to 18% year-on-year revenue growth for 2026.