Testing and inspection industry: the capital logic and investment insights behind data

From the financial advisory perspective, our key observations are as follows:

• Expedited shake-out of “small, fragmented, and weak” players, highlighting consolidation value: The decline in the total number of institutions alongside revenue growth reflects a "the strong get stronger" dynamic.
• Technology investment drives valuation premiums: Increased investment in domestically produced high-end instruments and intelligent inspection systems indicates the formation of technological barriers to entry.
• Internationalization and standardization remain undervalued opportunities: Certain segments still suffer from excessive competition and insufficient global integration.

Institutions Institutions with experience in overseas standard systems and cross-border testing and certification capabilities will become "scarce targets" in future M&A transactions.

As domestic competition intensifies, a growing number of manufacturing companies are accelerating their "going global" strategies, establishing production and sales networks in markets such as Southeast Asia, Europe, and the Middle East. Driving demand for export-oriented testing and certification services: Enterprises should not only comply with Chinese national standards but also understand and meet the regulatory and technical requirements of destination countries (e.g., CE, FDA).

Consequently, institutions capable of conducting testing aligned with international standards domestically and possessing experience in serving export-oriented clients are becoming indispensable links in the industrial chain. While such institutions may not hold all foreign certifications, they are often well-versed in overseas standard systems, and their reports enjoy a degree of international mutual recognition (e.g., CNAS accreditation through the ILAC-MRA framework, recognized in certain countries). This enables them to directly serve the quality verification needs of export-oriented enterprises or brand owners.

From an M&A perspective, these targets typically exhibit:

• Familiarity with overseas standard systems and international client experience, enabling seamless support for export-oriented enterprises;
• An export-oriented client base (e.g., in new energy, consumer electronics, medical devices, automotive components), ensuring stable orders and growth potential;
• Local testing capabilities compatible with international standards, providing inherent advantages amid the "manufacturing offshore" trend.

As “manufacturing offshore" and "cross-border testing" emerge as new growth engines for the industry, testing institutions that understand overseas standards and possess international mutual recognition or export experience will continue to be key focuses in capital markets and M&A transactions.

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