Recently, edicon held its first investor open day since going public, successfully attracting active participation from many institutional investors and high net worth individuals.

For investors, this is a rare opportunity to gain in-depth understanding of and insight into edicon's strategic layout, business development dynamics, and potential investment opportunities.

During this event, Edicon's CEO Gao Song and several core business executives shared their business experiences and strategic plans, and engaged in in-depth discussions on the company's future growth potential.

From market experience, the development of ICL enterprises is influenced by multiple factors such as macroeconomics, national policies, and market demand. In recent years, the impact of public health events has intensified the industry's volatility, testing not only the company's ability to cope with external environmental uncertainties, but also highlighting the importance of coordinated development among various internal departments. However, not all ICL enterprises can demonstrate enough forward-looking vision and flexibility, and find a balance point in the complex and changing market environment to achieve stable development.

As one of the pioneers in the domestic ICL industry, Edicon has profound insights into the development trends of the domestic and international ICL industry, and achieved counter-cyclical growth in the first half of this year. The theme of this open day focuses on 'hitting the bottom and rebounding'. So, how should we correctly assess the investment value of Edicon? This investor open day provides a comprehensive perspective.

As the concentration of the ICL industry increases, leading companies are benefiting from development dividends.

By learning from the development process of mature ICL enterprises abroad, we can see that the American ICL industry started early, and after many years of development, market mechanisms have led to industry maturity. Especially in the medical cost control environment of 1980, the industry concentration rapidly increased through means such as mergers and acquisitions. During this period, American ICL enterprises such as Quest and LabCorp gradually became industry leaders through a scalable and chain-operating model.

In contrast, China's ICL industry started relatively late, but has shown rapid development in recent years. Unlike overseas markets that increase outsourcing rates through market mechanisms, domestically, there is a more severe pressure to control medical insurance costs. ICL happens to align with the policy orientation of improving quality and efficiency. With the gradual advancement of medical reforms such as DRG, tiered diagnosis and treatment, and separating medical expenses, the demand for high-quality medical testing services from grassroots medical institutions and private hospitals is constantly growing. At the same time, the introduction of the Laboratory Developed Test (LDT) policy has paved 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 cost control policy in 2023, hospitals are increasingly demanding cost control, leading to a trend of market share concentration in the top companies in the Chinese ICL industry.

Public data shows that during previous public health incidents, the number of newly registered medical laboratories increased dramatically. However, as society fully returns to normal, this number has significantly dropped, with the annual closure of laboratories continuing to rise. It is evident that the industry is entering a phase of integration and capacity reduction. Therefore, it is not difficult to determine that the top ICL enterprises in China still have significant development potential.

In this process, top domestic ICL enterprises such as Edicon, by providing scalable and specialized services, have not only gained significant market share in the general testing field but also continually expanded in the specialized testing field. By leveraging technological innovation and enhancing service quality, they have significantly strengthened their competitiveness.

Co-building the specialized testing business in both directions marks a turning point from the bottom to recovery.

Further in-depth analysis of Edicon's business performance, performance is the most intuitive.

The financial report shows that the company achieved a revenue of 1.466 billion yuan in the first half of the year. Among them, non-Covid business grew by over 10% year-on-year, while special inspection business grew by over 30% year-on-year. This significant growth is fundamentally benefited from the dual drive of Guardant Health's special inspection business and co-construction business.

Looking at the special inspection business, Guardant Health has significantly improved sales performance by systematically building professional teams, selecting high-value customers, and delivering medical value. Especially in infectious disease projects, it achieved a 38% year-on-year growth, with a substantial 57% increase in tumor projects. In the long-term trend, since 2020, the company's special inspection business has maintained steady growth, with a compound annual growth rate of up to 38.6% from the first half of 2020 to the first half of 2024, fully demonstrating the sustainability and growth potential of its business model.

In terms of co-construction business, Guardant Health has 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 signed projects skyrocketed by 288%, and by precisely focusing on its target customers mainly composed of secondary, tertiary, and private hospitals, it has maintained a profit margin at least equal to or higher than its regular business. The soaring data reflects the market's high recognition of Guardant Health's co-construction model and may indicate its future development space.

At the same time, Guardant Health continues to reduce costs and increase efficiency, improving operational efficiency. In the first half of the year, the company's sales expenses were 0.202 billion yuan, a 13.8% year-on-year decrease; management expenses were 0.108 billion yuan, a 21.2% year-on-year decrease.

Benefiting from the rapid growth of the business and meticulous management in cost control and operational efficiency, the company's profitability continues to increase. In the first half of the year, the company achieved a gross profit of 0.56 billion yuan, with a gross margin exceeding 38%, and a net profit of 0.108 billion yuan after adjustments.

In response to this, Guardant Health's management stated that the company is currently at a crucial turning point in the bottoming-out and rebound process. This year will be the final year of declining revenue for the company, with next year beginning a trend of revenue recovery. Furthermore, leveraging operational leverage, the company's gross margin and net margin will also further increase.

It is reported that in the first half of this year, as the hospital procurement process transitions towards normalization and open bidding, ICL enterprises are facing new challenges and opportunities. To address this, Guardant Health has ensured its competitiveness and project success rate in the bidding process by integrating bidding resources, customizing solutions, and optimizing processes such as review and summary.

In addition, the company's CEO regularly visits all national subsidiaries to address sales operations, accounts receivable management, cost control, and other matters in each subsidiary. This top-down rapid response to market changes enables Guardant Health to develop more targeted solutions to adapt to the constantly changing market demands.

Through the strong growth of various business sectors and the company's proactive response to market changes, it is clear that the performance potential of Guardant Health is not just empty talk, but has solid performance support and clear market prospects.

Two core competitive advantages lay the foundation for growth, recognized by industry experts for long-term potential.

Looking ahead, Guardant Health's two core competitive advantages have solidly laid the foundation for its steady growth and continued leadership in the ICL industry.

On one hand, a replicable, standardized management system is the key driver of Guardant Health's continuous growth.

Whether in personnel costs or reagent cost management, the company has demonstrated highly standardized and systematic management advantages.

Especially in personnel management, by optimizing staff allocation and job matching, Guardant Health has achieved a year-on-year increase in labor efficiency. This includes not only reasonable planning of staff numbers but also precise job matching, ensuring that each employee can maximize efficiency in their most suitable position. These strategies also led to an 11% year-on-year increase in laboratory staff efficiency in the first half of 2024.

In terms of reagent cost control, Guardant Health has significantly reduced reagent costs each year through strict BOM (Bill of Materials) management, loss control measures, prioritizing localization, and being the earliest to implement nationwide unified procurement. These measures not only reduce unnecessary waste but also lower costs through scaled procurement.

Data shows that in the first half of this year, Guardant Health successfully achieved its goals of an 8% decrease in reagent costs and a 9% decrease in logistics costs, further reducing the reagent loss rate by 12% year-on-year.

On the other hand, Eddie Kang's overall departmental and cross-departmental collaboration capabilities are another major competitive advantage.

The highly transparent management, standardized implementation of processes, real-time monitoring of data, and the establishment of an integrated technology department collectively create a solid internal support system for Eddie Kang. This collaborative model not only greatly enhances work efficiency but also promotes rapid information flow and precise decision-making.

By continuously improving the management system and deepening cross-departmental collaboration, Eddie Kang is able to effectively control input costs, especially in co-construction business, helping co-construction customers achieve cost reduction, growth, and providing diverse services including academic support, thereby empowering co-construction customers and further enhancing the comprehensive capabilities of Eddie Kang's co-construction laboratory.

Furthermore, Eddie Kang's professionalism and innovative capabilities in the ICL industry have also received extensive praise and recognition from many experts and industry professionals.

Representatives from Shenzhen New Industries Biomedical Engineering, DeepMind AI, and guardant health shared their business cooperation experiences with Eddie Kang at the meeting, clearly stating that through close collaboration with Eddie Kang, they hope to achieve optimal resource allocation and further market expansion. They all view Eddie Kang as a long-term strategic partner.

The representatives unanimously believe that establishing a long-term partnership with Eddie Kang not only promotes mutual growth but also drives the development and advancement of the entire ICL industry. They are full of expectations for Eddie Kang's future development and believe that through this strategic cooperation, all parties can occupy a more favorable position in future market competition on the basis of mutual benefit. The construction of this partnership may indicate that Eddie Kang's influence in the industry will further expand, bringing new development opportunities for partners.

Conclusion

From the perspective of the capital markets performance, recently, in addition to the Federal Reserve cutting interest rates to inject liquidity into the market, the unexpected adjustment of domestic monetary policy has significantly stimulated the vitality of the capital markets.

The heavyweight policies of the three financial departments, the Political Bureau meetings, and the People's Bank of China continue to drive the rise of A-shares and Hong Kong stocks. The full-scale policies emphasized at the State Council Information Office press conference on Saturday further highlighted the importance of increasing the countercyclical adjustment intensity of fiscal policies and promoting high-quality economic development.

Against this backdrop, it can be expected that Eddiekan will have more premium opportunities while maintaining a leading position in the industry. With the continued realization of performance momentum, the company regaining market confidence will only be a matter of time.

In response, Ms. Yang Ling, the director of Eddiekan, also expressed confidence in the development of the Chinese economy, the prospects of the ICL industry, and the business development of Eddiekan. She emphasized that as one of the Carlyle Group's long-term investment projects in China, Eddiekan is expected to become a leading ICL enterprise in China with its efficient operation mechanism, combined with Carlyle's global vision and resources.