IPO | “ICL Service Provider” Addicon Holdings will be offering shares now and is expected to be listed on June 30

Futu News, June 19, this Monday$ADICON HOLDINGS (09860.HK)$An announcement was announced that it will issue 33.192,500 shares from June 19 to June 23, 2023. The company plans to issue 33.25 million shares, including a public sale of 3.32 million shares (10%) and an international sale of 298.725 million shares (90%) at an offering price of HK$12.32 per share, 500 shares per lot. The shares are expected to be listed on June 30, 2023.

Company Overview

Addicon Holdings is one of China's top three independent medical laboratory (or ICL) service providers. It mainly provides rich and first-class testing services to hospitals and physical examination centers through an integrated network of 33 self-operated laboratories across the country. As of December 31, 2022, the company has 18 laboratories certified by ISO15189 to ensure that customers are provided with quality assurance that they comply with this strict international standard.

Adikon Holdings' testing portfolio includes more than 4,000 medical diagnostic tests, including more than 1,700 screening tests and more than 2,300 special tests. During the track record period, the company's number of tests increased from 60.1 million in 2020 to 165 million tests in 2022, with a compound annual growth rate of 65.6%.

Thanks to a series of favorable government policies and industry developments, China's ICL market has grown rapidly in recent years. According to Frost & Sullivan's data, the domestic ICL market is expected to grow to RMB 51.3 billion in 2026. As a market leader in providing ICL services in China, Adikon Holdings is ready to benefit from these entry barriers and further occupy a larger share of such a rapidly growing market.

Financial Overview

In terms of financial conditions, during the track record period, Adikon Holdings' business revenue grew rapidly. Total revenue increased from about RMB 2,742 billion in 2020 to RMB 4.861 billion in 2022, with a compound annual growth rate of 33.1%. Net profit increased from RMB 290 million in 2020 to RMB 685 million in 2022, with a compound annual growth rate of 53.8%.

According to reports, Adikon Holdings' revenue mainly comes from medical diagnosis and testing services, followed by medical product sales. The revenue generated by medical diagnostic testing services accounted for the vast majority of the company's total revenue during the track record period, accounting for 91.7%, 93.1% and 90.5% of total revenue in 2020, 2021 and 2022, respectively. Revenue has grown significantly in recent years, mainly due to (i) increased demand for testing services, (ii) the expansion of the customer base, and (iii) the company provided COVID-19 testing after the outbreak of the epidemic. As its business expanded, the sample size also increased steadily during the track record period, from 60.1 million in 2020 to 80.5 million in 2021, and further increased to 165 million in 2022.

Industry Overview

As the aging population accelerates, health awareness continues to rise, and life expectancy continues to rise, China's total medical expenditure has increased rapidly in recent years, ranking second in the world. According to Frost & Sullivan, the market size of China's clinical testing industry increased from RMB 352.8 billion in 2017 to RMB 542.4 billion in 2021, with a compound annual growth rate of 11.4%, and is expected to reach RMB **** billion in 2026, with a CAGR of 10.6%.

Meanwhile, China's ICL market (excluding COVID-19 testing) increased from RMB 14.7 billion in 2017 to RMB 22.3 billion in 2021, with a compound annual growth rate of 10.9%, and is expected to increase to RMB 51.3 billion in 2026, with a compound annual growth rate of 18.2%.

China's ICL market (including COVID-19 testing) increased significantly from RMB 14.7 billion in 2017 to RMB 38.2 billion in 2021, with a compound annual growth rate of 27.0%, and is expected to increase to RMB 53.6 billion in 2026, with a compound annual growth rate of 7.0%.

Specifically, China's ICL market can be divided into general inspection and special inspection. China's ICL general inspection market increased from RMB 8.3 billion in 2017 to RMB 12 billion in 2021, with a compound annual growth rate of 9.8%, and is expected to reach RMB 22.4 billion in 2026, with a compound annual growth rate of 13.3% from 2021 to 2026.

Compared with ICL general inspection, special inspection is growing faster, from RMB 6.4 billion in 2017 to RMB 10.3 billion in 2021, with a compound annual growth rate of 12.3%, and is expected to reach RMB 28.9 billion in 2026, with a compound annual growth rate of 23.0%.

Cornerstone investors

In terms of cornerstone investors, a number of cornerstone investors agreed to subscribe for the number of offered shares available for purchase at the sale price, totaling approximately HK$291 million (assuming no over-allotment rights were exercised, based on the issue price of HK$12.32). Cornerstone investors include Mindray Global, Hong Kong New Industries, Fosun Diagnostics, Timestar Elite, and Corelink.

Use of funding

In terms of fund-raising, Addicon Holdings expects to receive approximately HK$83.9 million in net proceeds (based on the sale price of HK$12.32, assuming that the over-allotment rights are not exercised). According to the prospectus, the company plans to use the net proceeds from the sale of shares for the following purposes: 15% will be used to strengthen general inspection and special inspection capabilities, including R&D and sales and marketing capabilities; 25% for network expansion through new laboratories, joint investment and development of new channels; 25% to form strategic cooperation and strategic and additional acquisition opportunities with industry participants for business development; 15% to upgrade and expand existing laboratories; 10% to invest in operating infrastructure, including logistics facilities, artificial intelligence technology and information technology infrastructure; 10% for working capital and general corporate purposes.

Editor/Danial

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