Southwest Securities Recommends XUNFEIHEALTH (02506) for Its Proprietary Base Large Model

Stock News2025-12-22

Southwest Securities released a research report highlighting the significant growth potential of China's medical AI industry, driven by supportive policies. XUNFEIHEALTH (02506) stands out with its proprietary base large model, which continues to enhance performance capabilities. The Spark Medical Large Model X1 notably reduces hallucination phenomena while improving reasoning accuracy, professionalism, and interpretability. Leveraging its large model and big data technology platform, the company has built a diversified GBC (Government-Business-Consumer) product matrix. Southwest Securities initiates coverage with a "watch" recommendation. Key insights include:

**Expanding Medical AI Market in China** The application of AI in healthcare is poised for transformative growth. According to Frost & Sullivan, China's medical AI market surged from RMB 2.7 billion in 2019 to RMB 8.8 billion in 2023, achieving a 33.8% CAGR. By 2033, the market is projected to reach RMB 315.7 billion, with a 43.1% CAGR from 2023 to 2033. Policy support further accelerates development, exemplified by the 2024 "Healthcare Industry AI Application Scenario Reference Guide" jointly issued by the National Health Commission and other agencies, promoting deeper AI integration in healthcare.

**Proprietary Base Large Model Enhances Performance** In March 2025, XUNFEIHEALTH launched the Spark Medical Large Model X1, the only medical deep reasoning model trained entirely on domestic computing power. Real-world tests showed a 94.0% rational diagnosis rate in general practice. By July 2025, the model's capabilities were upgraded, with key metrics improving further: general diagnosis rationality rose to 95.0%, medical report interpretation to 86.3%, health consultation response to 91.5%, and cardiovascular diagnosis accuracy in hospitals to 91.2%. The model outperforms international counterparts like OpenAI o3 and DeepSeek R1 in critical medical tasks.

**Diversified GBC Product Matrix** As of end-2024, XUNFEIHEALTH served over 70,000 grassroots medical institutions across 30+ provinces, 670+ districts, and 500+ tiered hospitals, including 40+ top-100 and 7 top-10 hospitals in China. Key business segments include: 1) **To G (Government)**: Grassroots medical services revenue grew 52.3% YoY in H1 2025, while regional management platform solutions surged 178.1%. Core offerings include AI-assisted diagnosis and chronic disease management. 2) **To B (Business)**: Revenue declined 10% YoY in H1 2025 due to ongoing model updates, focusing on smart hospitals and AI-assisted diagnostics to enhance efficiency. 3) **To C (Consumer)**: Revenue grew 10% YoY in H1 2025, driven by imaging cloud platforms, post-diagnosis management, and smart hardware. The AI-powered patient management system leverages the Spark model to generate personalized recovery plans and improve doctor-patient interactions.

**Financial Projections & Risks** Revenue is forecasted at RMB 850 million, RMB 1.01 billion, and RMB 1.21 billion for 2025–2027, with PS ratios of 10.7x, 9x, and 7.5x, respectively. Risks include slower market expansion, contract execution delays, and intensifying competition.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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