Soochow Securities released a research report stating that while China's economy has entered an era of stock competition, the testing services market still retains growth drivers and its competitive landscape is expected to continue improving. Leading companies are set to become stronger, possessing vast room for growth. Firstly, the development of emerging technologies such as AI, new energy vehicles, humanoid robots, and commercial spaceflight will generate new testing demands and raise the entry barriers for the testing services market. Secondly, the transformation of China's industrial and economic structure will continue to increase requirements for product quality and branding, allowing leading firms with stronger credibility to stand out.
The main views of Soochow Securities are as follows: The testing services industry is strongly correlated with macroeconomic growth rates, characterized by a large market size, stable growth, and a fragmented competitive landscape. The Testing, Inspection, and Certification (TIC) industry serves a wide range of sectors including consumer goods, industrial products, and pharmaceuticals, covering the entire process from R&D to production and distribution. According to Bureau Veritas (BV), the global testing services market size in 2024 is approximately RMB 2.3 trillion, with a Compound Annual Growth Rate (CAGR) of around 6% from 2021 to 2024. Historically, the combined revenue growth of the four global comprehensive testing giants—SGS, BV, Eurofins, and Intertek—has closely tracked the growth rate of global real GDP.
China's testing services industry has been growing faster than GDP. The national testing and inspection market size in 2024 was about RMB 487.6 billion, with a CAGR of approximately 10.5% from 2015 to 2024. Since 2023, influenced by a slowdown in macroeconomic growth, the industry's growth rate has decelerated. In the first three quarters of 2025, China's testing services sector achieved revenue of RMB 30.4 billion, a year-on-year decrease of 7%. However, after excluding firms with a high proportion of medical testing business such as KingMed Diagnostics and Dian Diagnostics, revenue grew by 3% year-on-year, indicating a moderated growth pace. Leading companies like CTI Group, GRG Metrology & Test, and SIT exhibited more diversified downstream exposure, with distinct advantages in brand and service quality. Their revenues for the first three quarters of 2025 increased by 7%, 12%, and 9% year-on-year respectively, significantly outperforming the industry average.
In the first three quarters of 2025, the testing services sector in China reported a net profit attributable to shareholders of RMB 2 billion, down 6% year-on-year. After excluding the medical testing-heavy companies KingMed Diagnostics and Dian Diagnostics, the sector's net profit was RMB 2 billion, representing a 7% year-on-year increase and a return to positive growth. Leading companies CTI Group, GRG Metrology & Test, and SIT performed better than the industry, with their net profits growing by 9%, 27%, and 7% year-on-year respectively in the first three quarters of 2025.
Over the past two decades, China's TIC industry has benefited from the country's economic growth and globalization, leading to rapid expansion in both market size and the number of participants. Demand from emerging industries such as integrated circuits, commercial spaceflight, and new energy vehicles is rapidly expanding. Focus should be placed on leading companies possessing advantages in brand recognition, capital strength, and management capabilities.
Emerging sectors like the low-altitude economy and the semiconductor industry are developing rapidly, generating new testing service demands. While chemical testing segments such as food and environmental testing are mature, crowded, and highly competitive, faster-growing third-party testing segments with better competitive structures are primarily in physical testing. This includes areas like new energy vehicles, commercial spaceflight, integrated circuits, electronic appliances, and medical devices. These emerging blue-ocean markets feature higher investment thresholds for laboratories, with costs potentially double those of chemical testing labs. They also present higher technical barriers, require servicing the R&D phase, and demand personnel with stronger comprehensive skills. Leading companies have already made strategic layouts and are poised to benefit significantly.
Investment recommendation: Focus is recommended on leading testing companies with strong capital, management, and R&D capabilities, such as CTI Group, GRG Metrology & Test, and SIT.
Risk warnings include changes in macroeconomic conditions and policies, intensified industry competition leading to profit margin erosion, delays in laboratory commissioning, setbacks in merger and integration processes, and adverse impacts on brand and credibility.