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

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.