Company Reports

We initiate coverage on KingMed with a no-moat rating and a fair value estimate of CNY 32.40 per share, indicating an upside potential of around 10%. KingMed is China's largest independent clinical laboratory, with 49 centralized labs and over 4000 test items available as of 2023. We think KingMed’s earnings growth will be supported by the long-term secular tailwind of an underpenetrated ICL rate in China and increasing demand for outsourced testing. With this growth reflected in its share price, we prefer to wait for a more attractive valuation entry point.

KingMed is China's largest independent clinical laboratory in terms of clinical testing revenue. From 2016 to 2023, its revenue grew at a compound annual growth rate of 14.9%. It aims to deepen its network by investing in self-operated laboratories and codeveloping labs with hospitals or medical institutions. Given China's low ICL penetration rate of around 7% compared with around 35%-65% in other established markets such as Japan, Europe, and the United States, we believe that KingMed can still enjoy the long-term secular tailwinds of increasing outsourced testing demand. Our projected five-year revenue CAGR is 10.6%.