KingMed Diagnostics: Initiating Coverage on the Leading Chinese Independent Clinical Laboratory

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.