XUNFEI HEALTHCARE(2506.HK)：LEADING THE HEALTHCARE AI REVOLUTION; INITIATE WITH BUY-格隆汇

机构：招银国际
研究员：Jill WU/Cathy WANG

　　Xunfei Healthcare leads China’s healthcare AI market, with a 5.9% market share in 2023, according to F&S. Leveraging its Spark Medical Model, Xunfei Healthcare has developed various products and solutions to improve the operational efficiency and capabilities of primary healthcare (PHC) providers, hospitals (B), patients (C), and regional administrators (G). Driven by favorable policies and growing demand for smart transformation in healthcare institutions, the Company’s revenue increased rapidly, with a 2021-2023 CAGR of 22.2%. We expect Xunfei Healthcare’s revenue to increase at a CAGR of 36.9% from 2023 to 2026. We initiate coverage at BUY and derive a TP of HK$170.56, based on a 13x 2026E P/S.
　　Supportive policies accelerate healthcare AI application. Healthcare institutions in China are undergoing an intelligent transformation, with AI increasingly integrated into consultation, medical record management, and insurance risk control. Multiple national policies continued to promote AI applications to enhance medical services. According to F&S, China’s healthcare AI market is expected to expand from RMB8.8bn in 2023 to RMB315.7bn in 2033E, representing a CAGR of 43.1%.
　　Technological backing from iFlytek and deepening B2B partnerships help strengthen Xunfei Healthcare’s leadership. Leveraging the leading foundational model capabilities of iFlytek and extensive clinical experience and data accumulated from daily operation of its AI solutions, Xunfei Healthcare continuously upgrades the Spark Medical Model. In Mar 2025, the Company launched the Spark Medical Model X1, which outperformed GPT-4o and DeepSeek R1 in key medical reasoning tasks, demonstrating superior clinical support. The Company also continuously strengthens its B2B partnerships to build a robust ecosystem and solidify its commercial channel barriers.
　　Expanding customer base drove revenue growth: robust B2B and B2C growth and steady G-end. As of Dec 9, 2024, the Company had provided products and services to approximately 60,000 PHCs across over 610 counties in more than 30 provinces, and had entered over 500 graded hospitals. Accelerating intelligent transformation in hospitals drove strong growth in the Company’s hospital services, post-discharge management, and cloud medical imaging businesses. The aging population drove strong growth of hearing aids. Therefore, Xunfei Healthcare’s B2B and B2C revenue contribution grew rapidly and we believe this trend is likely to continue. In 1H24, the hospital and patient service revenue surged 146% YoY in 1H24, representing 66.9% (+29 ppts YoY) of total revenue.
　　Initiate at BUY with TP of HK$170.65. We are bullish on healthcare AI's prospects. We expect the Company to increase its revenue at a CAGR of 36.9% from 2023 to 2026 and rapidly narrow its net losses. We derive our TP of HK$170.56, based on a 13x 2026E P/S, to reflect the Company's high-growth potential.
　　We expect B2B (hospital services) and B2C (patient services) segments to continue driving Xunfei Healthcare’s revenue growth. We expect Xunfei Healthcare’s revenue to increase at a CAGR of 36.9% from 2023 to 2026E.
　　Xunfei Healthcare’s PHC services and regional healthcare solutions businesses (G-end) were under pressure in 2024, due to macroeconomic factors and local government fiscal constraints. However, we expect a recovery and steady growth in these two business segments from 2025 onward, driven by national policies aimed at alleviating local government debt and continued strong support for primary healthcare institutions. We expect revenue of PHC services to change by -3.8%/ 15.0%/ 10.0% YoY to RMB231mn/ 265mn/ 292mn in 2024E/ 2025E/ 2026E, respectively. We forecast revenue of regional healthcare solutions to change by - 5.6%/ 15.0%/ 10.0% YoY to RMB110mn/ 127mn/ 139mn in 2024E/ 2025E/ 2026E.
　　We expect Xunfei Healthcare to benefit significantly from the ongoing wave of hospital intelligent transformation. Hospital services (B-end) are expected to experience rapid growth, with revenue increasing by 104.7%/ 70.0%/ 65.0% YoY to RMB133mn/ 226mn/ 373mn in 2024E/ 2025E/ 2026E, respectively.
　　We expect the Company's patient services segment to grow rapidly, driven by increased sales of medical equipment such as hearing aids, as well as strong growth in imaging cloud and post-discharge management services. We expect revenue for patient services to increase by 86.5%/ 60.0%/ 55.0% YoY to RMB251mn/ 402mn/ 623mn in in 2024E/ 2025E/ 2026E, respectively.
　　Investment Risks
　　1) Underperformance in regional expansion and market development;
　　2) Negative impact of macroeconomic or industry headwinds on hospital procurement demand;
　　3) Weaker-than-anticipated demand for healthcare AI solutions;
　　4) Risk of intensified competition in the healthcare AI market.