Morningstar

Adicon Holdings Ltd 09860

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Stock XHKG Rating as of
HK$8.20 −0.04 (0.49%)
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As of Delayed Price Closed

Company Report

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Adicon: Initiating Coverage on One of China’s Largest Independent Clinical Laboratories

Yurou Zheng

We initiate coverage on Adicon with a no-moat rating and a fair value estimate of HKD 11.40 per share, indicating an upside potential of around 30%. Adicon is the third-largest independent clinical laboratory in China, with 36 centralized labs and over 4,000 test items available as of 2023. We think Adicon is undervalued. In our view, it is worth buying in the long run due to the long-term secular tailwind of an underpenetrated ICL rate in China and increasing demand for outsourced testing.

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Price vs Fair Value

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09860 is trading at a 393% premium.
Price
HK$8.20
Fair Value
HK$27.90
Uncertainty
High
1-Star Price
HK$73.95
5-Star Price
HK$4.41
Economic Moat
Xvsh
Capital Allocation
Qpmllqqdn

Bulls Say, Bears Say

Bulls

Adicon’s adoption of new technology, such as the laboratory information system, can improve operating efficiency and further boost operating margin.

Bears

Competition from excess capacity due to covid-19 testing may slow down Adicon’s growth in the next five years.

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Trading Information

Previous Close Price
HK$8.24
Day Range
HK$8.15–8.29
52-Week Range
HK$7.16–15.14
Bid/Ask
HK$8.20 / HK$8.21
Market Cap
HK$5.95 Bil
Volume/Avg
342,500 / 242,063

Key Statistics

Price/Earnings (Normalized)
22.66
Price/Sales
1.76
Dividend Yield (Trailing)
0.00%
Dividend Yield (Forward)
0.00%
Total Yield
—

Company Profile

Founded in 2004 and listing on the Hong Kong Exchange in 2023, Adicon is one of the largest independent clinical laboratories, or ICLs, in China. In October 2018, private equity Carlyle Group completed its investment in Adicon and has since been the largest single shareholder. Following Carlyle’s investment, Adicon quickly stepped up its footprint. It has a testing portfolio of over 4,000 medical diagnostic tests with 36 self-operated laboratories in 2023, compared with 1,800 items and 21 labs in 2018. Currently, esoteric tests account for nearly 60% of its testing portfolio. Esoteric tests require more specialized technologies and/or equipment.
Sector
Healthcare
Industry
Diagnostics & Research
Stock Style Box
Mid Core
Total Number of Employees
5,456
Website
https://www.adicon.com.cn

Competitors

Valuation

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Metric
09860
603882
SHL
Price/Earnings (Normalized)
 22.6695.2625.03
Price/Book Value
 3.182.211.65
Price/Sales
 1.762.131.45
Price/Cash Flow
 12.5613.1812.08
Price/Earnings
09860
603882
SHL

Financial Strength

Metric
09860
603882
SHL
Quick Ratio
 1.682.810.86
Current Ratio
 1.992.961.01
Interest Coverage
 5.1027.044.49
Quick Ratio
09860
603882
SHL

Profitability

Metric
09860
603882
SHL
Return on Assets (Normalized)
 6.68%1.41%3.75%
Return on Equity (Normalized)
 19.39%2.05%6.67%
Return on Invested Capital (Normalized)
 10.71%1.85%4.07%
Return on Assets
09860
603882
SHL

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