Key points of investment

The company is an intermediate channel service provider serving the laboratory departments of public medical institutions. It provides downstream customers with comprehensive testing service platform services, and expands to the two fields of its own IVD products and smart medical care on this basis. It can provide customers with medical information systems such as laboratory information systems (LIS systems), laboratory inventory management systems (SIMS), and blood management systems. The company's medical information technology business had revenue of 0.133 billion yuan in 2023, accounting for 1.45% of total revenue, with a growth rate of 10.42%; revenue for the first half of 2024 was 0.067 billion yuan, accounting for 1.61% of total revenue, with a growth rate of 6.36%, making it the fastest growing business.

Combines industry resources and data elements

The company has been providing overall comprehensive services to hospital customers since 2010. Through self-construction and investment cooperation, the company's service scope covers East China, Northeast China, Southwest China, South China and Central China, enabling the company to provide customers with stable, timely and efficient in vitro diagnostic products and services throughout the country. As of the first half of 2024, the company has provided professional in vitro diagnostic products and technical service support to more than 4,000 medical institutions at all levels across the country. The number of service customers is among the highest in the industry, and the number of customers in the intensified/district testing center is 411.

The company has accumulated data governance and application capabilities through digital construction for customers. The “Building a New Model of Medical AI Service with Dual Wheel Drive Based on Data and Capabilities” project won the first prize in the 2024 “Data Elements ×” competition in the Zhejiang branch finals of the healthcare track. Based on Runda Medical's unique structured, standardized, and standardized data governance capabilities, the project integrates patient clinical data into structured data, thus achieving efficient data integration and sharing.

In terms of data accumulation, the company's accumulated data labeling is applied to the big medical model. Medical data is mostly natural language text, difficult to be effectively processed by machines, and cannot reflect the value of data elements. In response to this difficulty, Runda Medical successfully created CDx (Clinical Data X, also known as Medical Data Foundation) through training on the HUAWEI Cloud Pangu model based on nearly 0.1 million data annotations and governance rules accumulated over the past 6 years, so that the medical community is no longer limited by data field design based on expert experience, and transforms all clinical text records into “fully structured data.”

Explore large-scale medical AI model applications with HUAWEI CLOUD

On June 6, 2023, the company and HUAWEI CLOUD formally signed a comprehensive strategic cooperation agreement. The two sides will build an AI model for the medical field based on the HUAWEI CLOUD platform to achieve smart medical services. In the same year, the company cooperated with HUAWEI CLOUD to launch products such as “Good Doctor Xiaohui” health assistant, generative medical records, and digital human intelligence services.

In 2024, the company will strengthen cooperation with HUAWEI CLOUD, launch a large-scale medical model co-creation plan, build full-stack autonomous smart medical scenario capabilities, create AI applications before, during, and after diagnosis, and improve the service level of hospitals and regional healthcare. In terms of medical examination scenarios, Runda Medical and HUAWEI CLOUD successfully launched the first domestic health management AI robot “Health Xiaomei” in August 2024, taking health management services a big step forward in the direction of intelligent and personalized health management services. In terms of pharmacy scenarios, Runda Healthcare, HUAWEI CLOUD, and Guangxi Liuyao Group launched the “Guizhong Pharmacy Smart Upgrade Program” based on the comprehensive cooperation agreement already signed. In addition, intelligent medical solutions have also been embedded in the top three leading hospitals in many provinces and cities in China, such as Taiping Financial Services and West China Hospital, which has successfully promoted the intelligent upgrading of all aspects of medical care.

The Hongmeng version of the “Xiaohui” app has entered the development and certification stage

On September 10, 2024, the company and HUAWEI CLOUD released the Big Model Native Solution, and launched four new products equipped with the HUAWEI CLOUD Big Model, the CDx data base, the “Good Medicine” medical smart device, and the “Xiaohui” health smart device. On the hospital side, the company and HUAWEI CLOUD launched a pilot program, hoping to form a number of model hospitals to be promoted and implemented in provincial and municipal hospitals across the country. Meanwhile, the Android version of the personal AI health assistant smart device “Xiaohui” is already in public beta, and the Hongmeng version is in the development and certification stage. We believe that as an important partner of Huawei in the field of medical informatization, the company is expected to take the lead in the Hongmeng ecosystem and gain C-side channel advantages.

Profit forecasting and valuation

The company is a leading domestic IVD product distribution leader. It has significant channel scale advantages. It has accumulated a large number of customers over the years. As the company and HUAWEI CLOUD continue to release and promote products in the medical AI field, and collaborate with the company's service business, various businesses are expected to promote each other and accelerate growth. We expect the company's revenue for 2024-2026 to be 10.523, 12.185, and 14.101 billion yuan, respectively, up 15.04%, 15.79%, and 15.73% year on year; net profit to mother will be 0.389, 0.512, and 0.688 billion yuan, respectively, up 42.25%, 31.81%, and 34.30% year on year. The corresponding 2024-2026 PE is 26, 20, 15. Maintain a “buy” rating.

Risk warning

Risk of industry policy changes, raw material supply risk, new product development and promotion falling short of expectations, and uncertainty about cooperation.