Recently, Adicon held its first investor open day since its listing, which successfully attracted the active participation of many institutional investors and high-net-worth individual investors.
For investors, this is a rare window to know and understand Adicon's strategic layout, business development dynamics and potential investment opportunities.
At the event, Adicon CEO Gao Song and a number of core business executives shared their business experience and strategic planning, and had an in-depth discussion on the company's future growth potential.
From the perspective of market experience, the development of ICL enterprises is affected by multiple factors such as macroeconomy, national policies, and market demand. In particular, the impact of public health events in recent years has exacerbated the volatility of the industry, which is not only a test of the company's ability to cope with the uncertainty of the external environment, but also highlights the importance of the coordinated development of various departments within the enterprise. However, not all ICL companies are able to demonstrate sufficient foresight and agility to find a balance in a complex and volatile market environment.
As one of the pioneers of the domestic ICL industry, Adicon has a deep insight into the development trend of the ICL industry at home and abroad, and has achieved contrarian growth in the first half of this year. The theme of this open day is "bottoming out", so how do we properly assess the value of Adicon's investment? This investor open day provides a holistic perspective.
Under the trend of increasing concentration in the ICL industry, leading enterprises have ushered in development dividends
Drawing on the development history of mature overseas ICL enterprises, it can be seen that the ICL industry in United States started early, and after years of development, the market mechanism has promoted the development of the mature industry. Especially in the medical cost control environment in 1980, the industry concentration increased rapidly through mergers and acquisitions. During this period, United States ICL companies such as Quest and LabCorp gradually became industry leaders with their large-scale and chain operation models.
In contrast, China's ICL industry has developed rapidly in recent years, although it started late. Unlike overseas countries that improve the rate of inspection outsourcing through market mechanisms, China is facing more severe pressure on medical insurance cost control, and ICL is in line with the policy orientation of improving quality and efficiency. With the gradual advancement of medical reforms such as DRG, hierarchical diagnosis and treatment, and separation of technology and consumption, the demand for high-quality medical testing services in primary medical institutions and private hospitals is also growing, and at the same time, the introduction of the laboratory self-built testing (LDT) policy has also opened up the way for the incremental introduction of high-end projects, providing a broad market space for the development of the ICL industry.
Especially after the implementation of the medical insurance fee control policy in 2023, the demand for cost control in hospitals is increasing, and the market share of China's ICL industry is showing a trend of concentrating on the top enterprises.
Public data shows that the number of newly registered medical laboratories increased dramatically during previous public health events. However, as society fully returns to normalcy, this number has dropped sharply, and the number of laboratories closed every year continues to rise, which shows that the industry is entering a stage of consolidation and capacity reduction. It is not difficult to judge that the domestic leading ICL enterprises still have great development potential.
In this process, Adicon and other domestic leading ICL companies, by providing large-scale and professional services, have not only achieved a significant market share in the field of general inspection, but also continued to develop in the field of special inspection, and significantly enhanced their competitiveness by virtue of technological innovation and improved service quality.
The two-way development of the special inspection and co-construction business ushered in a turning point of bottoming out
Further in-depth analysis of Adicon's business performance, the performance is the most intuitive.
According to the financial report, the company achieved revenue of 1.466 billion yuan in the first half of the year. Among them, the non-new crown business increased by more than 10% year-on-year, and the special inspection business increased by more than 30% year-on-year. This significant growth is fundamentally driven by the dual drive of Adicon's special inspection business and co-construction business.
From the perspective of special inspection business, Adicon has significantly improved its sales performance by systematically building a professional team, screening high-value customers and delivering medical value. In particular, the infection project achieved a year-on-year increase of 38%, and the oncology project increased by 57% year-on-year. From the perspective of long-term trends, the company's special inspection business has maintained steady growth since 2020, with a compound annual growth rate of 38.6% from the first half of 2020 to the first half of 2024, which fully proves the sustainability and growth potential of its business model.
In terms of co-construction business, Adicon also performed well. In the first half of the year, the company's co-construction business revenue surged by 74% year-on-year, the number of contracted projects surged by 288% year-on-year, and it maintained a profit margin at least equal to or higher than its regular business by focusing on its target customers, mainly secondary, tertiary and private hospitals. The rising data is enough to reflect the market's high recognition of Adicon's co-construction model, or it may indicate its future development space.
At the same time, Adicon continued to reduce costs and increase efficiency, and improve operational efficiency. In the first half of the year, the company's sales expenses were 202 million yuan, a year-on-year decrease of 13.8%; Administrative expenses decreased by 21.2% year-on-year to RMB108 million.
Thanks to the rapid growth of the business and the refined management of cost control and operational efficiency, the company's profitability continues to be released. In the first half of the year, the company achieved a gross profit of 560 million yuan, a gross profit margin of more than 38%, and an adjusted net profit of 108 million yuan.
In this regard, Adicon's management said that the company is currently at a critical turning point of bottoming out. This year will be the last year of the company's revenue decline, and next year will begin to resume the upward trend in total revenue, and at the same time, the company's gross and net profit margins will further improve due to the effect of operating leverage.
It is reported that in the first half of this year, with the transformation of the hospital procurement process to formalization and open bidding, ICL enterprises are facing new challenges and opportunities. To this end, Adicon ensures its competitiveness in the bidding process and the success rate of project implementation through process optimization measures such as integrating bidding resources, customized solutions, and review and summary.
In addition, the CEO of the company also regularly visits subsidiaries across the country to implement the sales business, receivables management, cost control and other matters of each subsidiary. This ability to respond quickly from top to bottom to market changes has enabled Adicon to develop more targeted solutions to adapt to changing market demands.
Through the strong growth of various business segments and the company's active measures to adapt to market changes, it can be clearly seen that the bottoming out potential of Adicon at the performance level is not empty talk, but has solid performance support and clear market prospects.
The core competitiveness of the two areas has laid the foundation for growth, and the long-term potential has been recognized by industry experts
Looking to the future, Adicon's two core competencies have laid a solid foundation for its steady growth and continued leadership in the ICL industry.
On the one hand, a replicable and standardized management system is the main driving force for Adicon's sustainable growth.
Whether it is in the management of personnel costs or reagent costs, the company has shown a high degree of standardization and systematic management advantages.
Especially in personnel management, by optimizing personnel allocation and job matching, Adicon has achieved year-by-year improvement in human efficiency. This includes not only the proper planning of the number of employees, but also the precise matching of roles to ensure that each employee can perform to the best of their ability. These strategies also led to an 11% year-on-year increase in laboratory productivity in the first half of 2024.
In terms of reagent cost control, Adicon has significantly reduced the cost of reagents every year through strict BOM (bill of materials) management, loss control measures, priority localization and the earliest implementation of national unified procurement. These measures not only reduce unnecessary waste, but also reduce costs through large-scale procurement.
According to the data, in the first half of this year, Adicon successfully achieved the goal of reducing reagent costs by 8% and logistics costs by 9%, and further reduced the reagent loss rate by 12% year-on-year.
On the other hand, Adicon's ability to collaborate across departments is another competitive advantage.
The high level of transparency of management, the standardized implementation of processes, the real-time monitoring of data, and the establishment of an integrated technology department have jointly built a solid internal support system for Adicon. This collaboration model not only greatly improves work efficiency, but also promotes the rapid flow of information and the accuracy of decision-making.
Through continuous improvement of the management system and deepening cross-departmental collaborative operations, Adicon can effectively control input costs, especially in the co-construction business, help co-construction customers achieve cost reduction and increment, and provide diversified services such as academic support, so as to empower co-construction customers and further enhance the comprehensive ability of Adicon co-construction laboratories.
Not only that, Adicon's professionalism and innovation ability in the ICL industry have also been widely praised and recognized by many experts and industry insiders.
At the meeting, representatives from New Industry, Deep Thinking Artificial Intelligence and Guardant Health shared their business cooperation experience with Adicon, and made it clear that through close cooperation with Adicon, they are expected to achieve optimal allocation of resources and further expansion of the market, and they all regard Adicon as a long-term strategic partner.
Delegates agreed that a long-term partnership with Adicon will not only promote mutual growth, but also promote the development and progress of the ICL industry as a whole. They are full of expectations for the future development of Adicon, and believe that through this strategic cooperation, all parties can occupy a more favorable position in the future market competition on the basis of mutual benefit and win-win results. The establishment of this partnership may indicate that Adicon's influence in the industry will be further expanded, and it will also bring new development opportunities to partners.
epilogue
From the perspective of the performance of the capital market, in addition to the Federal Reserve's interest rate cut to inject liquidity into the market, the unexpected adjustment of domestic monetary policy has also significantly stimulated the vitality of the capital market.
Heavy policies such as the three financial ministries and commissions, the Politburo meeting, and the People's Bank of China continued to promote the rise of A-shares and Hong Kong stocks. The top-level policy at the press conference of the State Council Information Office on Saturday emphasized the importance of increasing the countercyclical adjustment of fiscal policy and promoting high-quality economic development.
In this context, it can be expected that Adicon is expected to get more premium opportunities under the industry's leading position. As the performance momentum continues to materialize, it will only be a matter of time before the company wins back market confidence.
In this regard, Ms. Yang Ling, Chairman of Adicon, also expressed confidence in China's economic development, the prospects of the ICL industry and the business development of Adicon. She emphasized that Adicon, as one of Carlyle's most important long-term investment projects in China, is expected to become the leading ICL company in China with its efficient operation mechanism, combined with Carlyle's global vision and resources.