GBC synergy to drive long-term growth

GBCsynergytodrivelong-term growth Target PriceHK$92.55(Previous TPHK$143.59)Up/Downside33.0%Current PriceHK$69.60 XunfeiHealthcare reportedFY25revenueofRMB 915mn(+24.7% YoY), ~4%below our estimates,mainlydue to slower-than-expectedG-endgrowthin2H25.The decelerationof G-end growth (87% YoY in 1H25 vs. 4% YoY in 2H25)wasprimarilyattributable to some centralized provincial procurement,whichcompressed per-district project pricing.Conversely, the B-end businessrecoveredrobustlyin 2H25, with full-year growth of 31.1% YoY following a soft 1H25.Profitabilitybeatourexpectationsasattributable net lossnarrowed51.1% YoY toRMB65mn, driven by improved operating leverage.Looking ahead,we thinktheCompanyis executing a clearstrategy:solidifying G-end leadership, acceleratingB-end hospital penetration, andleveragingGBCsynergyto scale C-end patientservices into a long-term growth engine. China Healthcare Jill WU, CFA(852) 3900 0842jillwu@cmbi.com.hk Cathy WANG(852) 3916 1729cathywang@cmbi.com.hk Rapidcustomer expansiondrivenby policy tailwinds.Xunfei Healthcarecontinuedto expand its client base in 2025,serving over 77,000 PHCinstitutions across 806 districts/counties and 600+ graded hospitals,up from70,000+ PHCs,670+ districts, and500+ hospitalsin end-2024.Notably, wesee continuedprovincial replication in 2025.For example, the Companyachieved fullcoverageof its General Practice CDSS across all 90 counties inZhejiang, covering 1,405 PHC institutions, and secured its first out-of-Anhuiprovincial imaging cloud platform project in Guangxi. Withstrengthening policysupport for AI-assisted diagnosis, we expectcontinued geographic expansionand deepeningmarket penetrationacrossPHC institutions and hospitals. GBC synergyto drivelong-termresilientrevenuegrowth.C-end patientmanagement services revenue increased 29% YoY to RMB273mn, accountingfor ~30% of total revenue. In our view,C-end business is strategically importantbecause it shifts Xunfei Healthcare from project-based government/hospitalprocurement toward a more recurring patient-paid business.Leveraging trustbuilt through its G-and B-end businesses such as Digital and Intelligent FamilyDoctor and hospital solutions, the Company is convertinghospitaltraffic intoconsumer applications such as Xunfei Xiaoyi and AI-enabled post-dischargemanagement. Early pilots of Digital and Intelligent Family Doctor in ShanghaiandShenzhen Longhua,along with the AI-enabled post-dischargemanagement at Qilu Hospitalsuggested encouraging adoption.In 2025, thecommunication conversion rate for paying patients reached 50% and NPSimproved from 35% to 50%.With~300 million annual hospital discharges,theinstitutional-led traffic acquisitionwill establisha massiveoperating base for C-end monetization. Source: FactSet Maintain BUY.We maintain BUY based on Xunfei Healthcare's leadership inChina's medical AI market. However,given the limited visibility regardinggovernment procurement and project rollout pacing, we lower our2025-28ErevenueCAGRforecastsfrom 22.4% to 20.5%.And tofactor in broader sectorde-rating, we lower our target multipletopeer-aligned levels. Werevise ourtarget price to HK$92.55, based on9x 2026E P/S. Disclosures& Disclaimers AnalystCertificationThe research analyst who is primary responsible for the content of this research report, in whole or in part, certifies thatwith respect to the securities or issuer that the analyst covered in this report: (1) all of the views expressedaccurately reflect his or her personal views about the subject securities or issuer; and (2)no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific views expressed by that analyst in this report.Besides,the analyst confirms that neither the analyst nor his/her associates (as defined in the code of conduct issued by The Hong Kong Securities and Futures Commission) (1) have dealt in or traded in the stock(s) covered in this research report within 30 calendar days prior to the date of issue of this report; (2) willdeal in or trade in the stock(s) covered in this research report 3 business days after the date of issue of this report; (3)serve as an officer of any of the HongKong listed companies covered inthis report; and (4) have any financial interests in the Hong Kong listed companies covered in this report.CMBIGM or its affiliate(s) have investment banking relationship with the issuers covered in this report in preceding 12 months. CMBIGMRatings : Stock with potential return of over 15% over next 12 months: Stock with potential return of +15% to-10% over next 12 months: Stock with potential loss of over 10% over next 12 months: Stock is not rated byCMBIGM BUYHOLDSELLNOT RATED :Industry expected to outperform the relevant broad market benchmark over next 12 months:Industry expected to perform in-line with the relevant broad market benchmark over next 12 months:Industry expected to underperform the relevant broad market benchmark over next 12 monthsCMB Interna