Incident: On March 11, Liuyao Group, Huawei, and Runda Medical held a seminar on “AI+ Healthcare” full-scenario application solutions at Liuyao Group's Nanning Park. The three parties exchanged discussions on promoting the application of artificial intelligence (AI) medical models throughout the hospital diagnosis and treatment process and in-hospital patient services. The aim was to accelerate the implementation of related projects in Guangxi core medical institutions and the retail side of Liuyao Group through the conference, build and improve in-hospital auxiliary diagnosis and health management solution systems, and provide health management services throughout the life cycle.

Reviews:

The AI application plan covers in-hospital & out-of-hospital scenarios, and the three parties work together to promote project implementation: According to Liuyao Group's official account, the AI application plan includes in-hospital and out-of-hospital scenarios, as well as intelligent solutions such as intelligent triage, AI assistance for clinical diagnosis and treatment, post-diagnosis AI life cycle management, smart supply chain and low-altitude solutions, and smart pharmacies. At the conference, Liuyao Group introduced the progress of the AI application benchmark hospital project pioneered in Nanning. At present, the project has implemented scenario applications including AI generation of structured medical records, interpretation of test reports, assisted diagnosis and treatment, and patient management. It will also further promote the in-depth application of AI in full-cycle health management. Runda Medical introduced the functional features and hospital usage of “ASRock Smart Medicine” based on the LightDC AI and DeepSeek large models, which are Huawei's lightweight AI training and promotion platforms. Huawei introduced the recent establishment of a medical and health care corps to strengthen its in-depth layout in the healthcare field. It is expected to rely on technical foundations such as Shengteng and Pangu models to integrate Huawei's superior resources in the fields of 5G communication, edge computing, cloud computing, etc., to build an AI-assisted diagnosis solution system, promote the application of large medical models in clinical scenarios, provide doctors with more accurate auxiliary diagnostic tools, and help improve the accuracy and efficiency of medical diagnosis.

Supply chain & hospital side & retail applications may be the focus of future breakthroughs: Currently, various projects related to Liuyao Group, Huawei, and Runda Healthcare are continuing to advance. On the supply chain side, through the introduction of the intelligent algorithm of the Huawei Tianzou Solver, a qualitative leap forward in logistics efficiency and accuracy has been promoted. At the same time, AI assistants and digital employees have been developed and applied to achieve rapid information retrieval and replace simple and repetitive standardized operations by humans, and the results of AI cost reduction and efficiency are beginning to show. On the hospital side, the pharmaceutical consumables SPD project and artificial intelligence (AI) applications assist doctors in patient education, medical record generation and analysis, assessment and rehabilitation, etc., to further enrich Liu Yao's value-added services, effectively helping hospitals improve medical service capabilities and efficiency. On the retail side, all parties are actively promoting AI applications to support customer health management and store operations. We believe that the AI medical market is relatively prosperous in the future, while Huawei, Runda, and Liu Yao all have advantages in their respective fields. Combined, the company has strong competitive strength in the Guangxi pharmaceutical distribution market. If the AI application solution can be successfully commercialized, it is expected to bring a second growth curve to the company's growth.

Profit forecast and investment rating: We expect the company's revenue for 2024-2026 to be 21.439 billion yuan, 22.45 billion yuan, and 24.079 billion yuan, respectively, with year-on-year growth rates of about 3%, 5%, and 7%, respectively. The net profit to the mother will be 0.888 billion yuan, 0.947 billion yuan, and 1.045 billion yuan, respectively, up about 5%, 7%, and 10% year-on-year, corresponding to the current stock price PE, which is 8.36 times, respectively. At 7.84 times and 7.1 times, we maintained the company's “buy” investment rating.

Risk factors: AI model implementation falls short of expectations, commercialization of AI applications falls short of expectations, risk of termination of cooperation, intensification of market competition, growth of pharmaceutical wholesale business falls short of expectations, untimely collection of accounts receivable, industrial business growth falls short of expectations, pharmacy business growth falls short of expectations.