Kingmed Diagnostics(SH:603882) Zhong Guo Yin Hang·2024-05-28 05:42Investment Rating - Kingmed is downgraded to Neutral with a 12-month target price (TP) of Rmb41, down from Rmb75, indicating a 12.9% upside potential [1][24][20] - Dian Diagnostics maintains a Neutral rating with a revised TP of Rmb16, down from Rmb23, reflecting a 19.8% upside [1][24][20] - AmoyDx is rated as Buy with a target price of Rmb36, based on strong growth prospects in the cancer companion diagnostics market [1][28][20] Core Insights - The independent clinical laboratories (ICLs) are facing prolonged headwinds beyond the short-term impacts of Covid, including lower testing volumes, increased competition, and price cuts for diagnostic services [1][2][10] - The number of independent labs in China has surged from approximately 15,000 in 2019 to around 26,000 in 2023, intensifying competition in the market [2][10] - The anti-corruption campaign in healthcare is shifting diagnostics from outsourcing to in-hospital testing, benefiting companies like AmoyDx that focus on companion diagnostics [1][24][20] Summary by Sections Kingmed - Kingmed's revenue is projected to decline from Rmb15.5 billion in 2022 to Rmb8.3 billion in 2024, with a net profit of Rmb447 million expected in 2024 [1][32] - The company's gross profit margin (GPM) is anticipated to decrease due to a 30% price cut on average selling prices (ASP), which will reduce GPM by 4.3 percentage points [10][14] - Kingmed's market share is expected to remain stable despite the competitive pressures, but revenue and net profit estimates have been lowered due to declining total addressable market (TAM) [16][17] Dian Diagnostics - Dian's revenue is expected to decrease from Rmb13.4 billion in 2023 to Rmb13.0 billion in 2024, with a significant drop in net profit from Rmb663 million in 2023 to Rmb374 million in 2024 [1][35] - The company faces challenges from the loss of Covid-related business and increased competition, leading to a decline in GPM and NPM [27][24] - Dian's ability to leverage established relationships with hospitals gained during the Covid period is seen as a potential growth driver for its non-Covid testing business [27][24] AmoyDx - AmoyDx is projected to see a significant increase in the penetration rate of tumor companion diagnostics from 13% in 2020 to 45% by 2031, with expected revenue growth above 20% annually over the next decade [1][28] - The company's domestic sales reached Rmb785 million in FY23, reflecting a year-on-year growth of 23.65%, with in-hospital revenue growing over 40% [24][28] - AmoyDx's overseas business is also expanding, expected to contribute over 20% of its revenue by 2031 [1][28]