Group 1 - Morgan Stanley adjusted the target price for Alibaba Health to HKD 5 after the company announced its half-year performance, maintaining an "Overweight" rating [1] - The bank forecasts revenue growth rates for Alibaba Health at 11%, 10%, and 10% for the fiscal years 2025 to 2027 [1] - Expected IFRS net profit margins are projected to reach 5.3%, 6.7%, and 8% over the same period, with an average annual compound growth rate of 35% for IFRS net profit over the next three years [1]

Investment Rating - The investment rating for the company is "Outperform the Market" [4][10][3] Core Views - The company reported a revenue of 14.3 billion HKD for FY2025H1, representing a year-on-year growth of 10%, primarily driven by the rapid growth of its pharmaceutical platform business [1][7] - The adjusted net profit margin increased from 5.0% to 6.8% year-on-year, and the gross profit margin improved from 22.1% to 24.8%, attributed to a shift in product mix towards higher-margin health equipment and supply chain efficiency [2][7] - The company expects continued growth in online health consumption, with online growth rates significantly outpacing offline [8] Revenue Summary - The company's pharmaceutical self-operated revenue reached 12.1 billion HKD, a 6% increase year-on-year, with a focus on optimizing the self-operated product category structure [1][7] - E-commerce platform service revenue surged to 1.7 billion HKD, marking a 68% increase, mainly due to the integration of health category advertising and improved advertising-platform synergy [1][7] - Revenue from healthcare and digital services declined to 440 million HKD, a 9% decrease year-on-year [1][7] Profit Summary - The adjusted net profit for FY2025 is projected to be 2.035 billion HKD, with a significant increase of 47% from previous estimates, driven by the acquisition of Alibaba's advertising business [3][10] - The company aims to maintain a disciplined approach to investment while gradually increasing its market share in platform business [2][7] - The forecasted adjusted net profit for FY2026 is 2.495 billion HKD, and for FY2027, it is expected to reach 3.242 billion HKD [6][10] Financial Metrics - The company’s current stock price corresponds to a FY2025 price-to-earnings ratio of 31x, with a target price range of 5.52 to 5.78 HKD, indicating an upside potential of 32% to 39% from the current price [3][10] - The projected revenue for FY2025 is 31.052 billion HKD, with a year-on-year growth of 14.9% [6][10] - The adjusted net profit margin is expected to reach 6.6% in FY2025, increasing to 8.5% by FY2027 [6][10]

Revenue and Profit Growth - Total revenue increased to RMB 14,273.7 million, up 10.2% year-over-year[2] - Net profit rose to RMB 769.0 million, a 72.8% increase year-over-year[2] - Adjusted net profit reached RMB 977.6 million, up 52.2% year-over-year[2] - Revenue for the period reached RMB 14,273,724,000, a 10.2% increase compared to the same period last year, driven by steady growth in pharmaceutical self-operated and e-commerce platform businesses[23] - Adjusted net profit increased by 52.2% to RMB 977,582,000, reflecting strong operational performance[22] - Revenue increased to RMB 14,273,724 thousand in 2024 from RMB 12,956,000 thousand in 2023, representing a growth of approximately 10.2%[51] - Gross profit rose to RMB 3,533,765 thousand in 2024, up from RMB 2,868,668 thousand in 2023, reflecting a 23.2% increase[51] - Net profit attributable to the parent company's owners increased to RMB 768,953 thousand in 2024 from RMB 445,891 thousand in 2023, a significant growth of 72.5%[51] - Adjusted net profit increased to RMB 977,582,000, driven by growth in self-operated pharmaceutical business and operational efficiency improvements[37] Pharmaceutical Business Performance - Pharmaceutical e-commerce platform revenue surged 67.5% to RMB 1,710.5 million[2] - Self-operated pharmaceutical business revenue reached RMB 12,120.9 million, up 5.9% year-over-year[2] - SKUs under self-operated business grew 6.1% to 810,000[2] - The company's self-operated pharmaceutical business revenue reached RMB 12,120.9 million, a year-on-year increase of 5.9%, with SKUs growing by 6.1% to 810,000[11] - Pharmaceutical self-operated business revenue grew by 5.9% to RMB 12,120,866,000, attributed to expanded product categories and improved user experience[24][25] - Pharmaceutical e-commerce platform business revenue surged by 67.5% to RMB 1,710,492,000, driven by platform expansion and enhanced service offerings[26] - Revenue from pharmaceutical self-operated business reached RMB 12,120,866 thousand, an increase from RMB 11,446,663 thousand in the same period last year[64] - Revenue from pharmaceutical e-commerce platform business grew to RMB 1,710,492 thousand, up from RMB 1,021,241 thousand in the previous year[64] Platform and User Growth - Annual active consumers on the Taotian medical health platform exceeded 300 million[2] - GMV on Tmall Health platform grew steadily, with online SKUs increasing over 20% to 78 million[2] - Number of merchants served increased by over 25% to more than 40,000[2] - The number of SKUs on the Tmall Health platform increased by over 20% to 78 million, and the number of merchants served grew to over 40,000[9] - Tmall Health platform's annual active consumers exceeded 300 million, with GMV achieving high-quality and stable growth over the past six months[9] Healthcare Services and Innovation - Number of contracted healthcare professionals providing online consultation services exceeded 230,000, an increase of over 20,000 from the previous year[3] - The number of registered physicians, pharmacists, and nutritionists providing online health consultation services exceeded 230,000, an increase of over 20,000 compared to the previous fiscal year[13] - The revenue from healthcare and digital services decreased by 9.4% to RMB 442.4 million, while certain innovative businesses like Xiaolu TCM maintained stable growth[13] - The Xiaolu TCM business saw a nearly 3x year-on-year increase in orders for products like herbal paste and Sanfu patches[14] - The company launched the "New Product Explosion Plan," investing 10x resources to support 100 health-related new products, with tailored strategies for 10 key products[10] - The company collaborated with leading brands to launch innovative products, such as low-concentration atropine eye drops for children and oral contraceptives for women[11] - Revenue from healthcare and digital services decreased by 9.4% to RMB 442,366,000[27] - Revenue from healthcare and digital services business decreased to RMB 442,366 thousand from RMB 488,096 thousand in the same period last year[64] Strategic Initiatives and Partnerships - The "Ma Shang Fang Xin" traceability platform has established deep partnerships with over 600 leading pharmaceutical companies[16] - The company plans to expand its "Cloud Pharmacy," "Cloud Hospital," and "Cloud Infrastructure" strategies, aiming to serve 500 million users within five years[21] - The "Hearing Aid Action 2024" initiative aims to establish 25 community hearing test points by November 2024, targeting over 200,000 community users[19] - The rare disease care platform expanded from 2 to 17 rare diseases, serving over 1,000 patients and allocating RMB 7.43 million in donations[18] - The company continues to invest in AI and big data models to enhance user experience and search efficiency in the medical e-commerce sector[17] Financial Metrics and Expenses - Gross profit increased by 23.2% to RMB 3,533,765,000, with gross margin rising to 24.8% from 22.1%[22] - Fulfillment expenses increased by RMB 16,796,000 to RMB 1,265,604,000, but the ratio to self-operated pharmaceutical revenue decreased to 10.4% from 10.9%[29] - Sales and marketing expenses increased by 12.8% to RMB 980,698,000, accounting for 6.9% of total revenue[30] - Administrative expenses increased by 7.9% to RMB 182,867,000, maintaining a stable ratio of 1.3% of total revenue[31] - Product development expenses decreased slightly by RMB 93,000 to RMB 319,221,000, with the ratio to total revenue dropping to 2.2% from 2.5%[32] - Other income and gains decreased to RMB 326,586,000, mainly due to reduced investment disposal gains[33] - Other expenses and losses increased significantly to RMB 267,956,000, primarily due to impairment losses on investments in associates[34] - Loss from a joint venture amounted to RMB 9,982,000, compared to a profit of RMB 1,588,000 in the same period last year[35] - Gross profit increased by 23.2% to RMB 3,533,765,000, with gross margin rising to 24.8% from 22.1%[28] - Other income and gains totaled RMB 326,586 thousand, a slight decrease from RMB 336,078 thousand in the same period last year[66] - Pre-tax profit was impacted by a financial asset impairment loss of RMB 11,221 thousand, compared to a reversal of RMB 2,415 thousand in the previous year[69] - Employee benefit expenses, including salaries and bonuses, amounted to RMB 533,110 thousand, down from RMB 572,590 thousand in the same period last year[69] - Total tax expense for the six months ended September 30, 2024, was RMB 52,021 thousand, compared to RMB 36,128 thousand for the same period in 2023[70] Cash Flow and Financial Position - Cash and cash equivalents decreased to RMB 7,442,897,000 as of September 30, 2024, from RMB 9,553,110,000 as of March 31, 2024[40] - Net cash generated from operating activities was RMB 562,160,000 for the six months ended September 30, 2024, compared to RMB 910,177,000 for the same period in 2023[40] - Net cash used in investing activities was RMB 733,871,000, primarily due to long-term fixed deposits of RMB 2,601,554,000 and purchases of financial assets at fair value through profit or loss of RMB 2,090,000,000[42] - Net cash used in financing activities was RMB 38,693,000, mainly due to lease principal payments of RMB 16,105,000 and share repurchases of RMB 22,928,000[43] - The company had no borrowings as of September 30, 2024, resulting in no gearing ratio[44] - Total employee costs were RMB 533.1 million for the six months ended September 30, 2024, compared to RMB 571.2 million for the same period in 2023[47] - The company had 1,422 full-time employees as of September 30, 2024, down from 1,435 as of March 31, 2024[47] - The company did not declare an interim dividend for the six months ended September 30, 2024[50] - Short-term investments at fair value through profit or loss were approximately RMB 290.8 million as of September 30, 2024, compared to none as of March 31, 2024[49] - The company did not make any significant investments, acquisitions, or disposals of subsidiaries, associates, or joint ventures during the reporting period[49] - Total comprehensive income for the period was RMB 658,083 thousand in 2024, compared to RMB 830,812 thousand in 2023, showing a decrease of 20.8%[52] - Non-current assets increased to RMB 8,354,690 thousand in 2024 from RMB 6,193,100 thousand in 2023, a growth of 34.9%[53] - Current assets decreased to RMB 11,913,886 thousand in 2024 from RMB 13,512,237 thousand in 2023, a decline of 11.8%[53] - Total equity attributable to the parent company's owners increased to RMB 15,172,358 thousand in 2024 from RMB 14,503,378 thousand in 2023, reflecting a 4.6% growth[54] - The company's cash and cash equivalents decreased to RMB 7,442,897 thousand in 2024 from RMB 9,553,110 thousand in 2023, a reduction of 22.1%[53] - Long-term fixed deposits increased significantly to RMB 3,085,190 thousand in 2024 from RMB 694,000 thousand in 2023, a growth of 344.5%[53] - The company's total liabilities decreased to RMB 5,019,078 thousand in 2024 from RMB 5,187,733 thousand in 2023, a reduction of 3.2%[54] Corporate Governance and Reporting - The company's board of directors approved the interim financial statements on November 13, 2024[78] - The company has adopted corporate governance practices in line with the Corporate Governance Code, with the exception of providing monthly updates to the board, which are provided as needed[79] - During the reporting period, the company did not purchase, redeem, or sell any of its listed securities, except for the acquisition of 7,934,000 shares under the 2014 Share Award Plan[81] - No significant changes in the company's financial position since the annual report as of March 31, 2024[83] - The interim results for the reporting period have been reviewed by the Audit Committee and the independent auditor, Ernst & Young, with no objections to the accounting methods[84] - The interim report will be published on the Hong Kong Stock Exchange website (www.hkex.com.hk) and the company's website (www.irasia.com/listco/hk/alihealth), and will be sent to shareholders in due course[85] Tax and Regulatory Compliance - The company's mainland China entities are subject to a corporate income tax rate of 25%, with two subsidiaries enjoying a preferential tax rate of 15% due to their status as high-tech enterprises, and one subsidiary in Hainan Free Trade Port also benefiting from a 15% tax rate[71] - The company did not declare an interim dividend for the six months ended September 30, 2024, consistent with the same period in 2023[72] - Basic earnings per share for the six months ended September 30, 2024, were calculated based on a profit attributable to ordinary shareholders of RMB 768,953 thousand and a weighted average number of ordinary shares of 16,064,987,934[73] - The company acquired property and equipment with a total cost of RMB 3,114 thousand and sold property and equipment with a net book value of RMB 407 thousand, resulting in a loss of RMB 173 thousand for the six months ended September 30, 2024[74] - Accounts receivable and notes receivable totaled RMB 843,306 thousand as of September 30, 2024, with accounts receivable from Alibaba Group affiliates amounting to RMB 414,950 thousand[75][76] - Accounts payable and notes payable totaled RMB 3,036,811 thousand as of September 30, 2024, including RMB 419,701 thousand payable to Alibaba Group affiliates[77] - The company's liabilities classification as current or non-current remained unchanged after the application of the revised accounting standards[59] Market and Customer Focus - Over 95% of the company's revenue and non-current assets are derived from external customers and are located in Mainland China[61] - No single external customer accounted for 10% or more of the company's total revenue during the six months ended September 30, 2024[62]

Healthcare Sector Growth and Innovation - Revenue growth in the healthcare sector driven by increased adoption of "Internet + Healthcare" services, supported by national policies[9] - Significant investment in technological innovation to enhance digital healthcare services and operational capabilities[9] - Expansion of healthcare data integration and innovation, aligning with the national "Data Element ×" three-year action plan (2024–2026)[9] - Continued focus on regulatory compliance and industry standardization in the internet healthcare sector[9] - Strategic partnerships to deliver diversified and multi-level healthcare services to users[9] - The company partnered with Huadong Medicine and Pfizer to launch innovative solutions for type 2 diabetes and alopecia areata online[11] - The company collaborated with over 220,000 licensed physicians, pharmacists, and nutritionists, providing over 11,000 daily online consultations (excluding prescriptions) as of March 31, 2024[14] - Xiaolu TCM business had over 120,000 registered TCM physicians and 116 dispensing centers covering 28 provinces and municipalities[14] - The company's "Aidou·Rehabilitation Health Cabin" served over 50,000 people in rural areas as of March 31, 2024[17] - The company launched the Doctor U intelligent one-stop doctor-patient education platform, leveraging big model technology to optimize workflow efficiency[17] - The company expanded its "Little Deer Lamp" children's critical illness救助 platform, adding a leukemia-specific救助 program[17] Financial Performance and Revenue - Total revenue for the fiscal year ending March 31, 2024, was RMB 27,026.6 million, a slight increase of 1.0% year-over-year[19] - Net profit for the fiscal year ending March 31, 2024, reached RMB 883.1 million, a significant increase of 64.6% year-over-year[19] - Revenue from pharmaceutical self-operated business was RMB 23,739.2 million, a slight increase of 0.6% year-over-year[26] - The company's healthcare and digital services revenue reached RMB 957.8 million, a year-over-year increase of 2.6%, with daily online consultations (excluding prescriptions) growing to 11,045 sessions[29] - Revenue for the reporting period was RMB 27,026,555,000, an increase of RMB 263,539,000 or 1.0% compared to the same period last year, driven by steady growth in pharmaceutical self-operated business, pharmaceutical e-commerce platform business, and medical health and digital services business[41] - Pharmaceutical self-operated business revenue reached RMB 23,739,246,000, a year-on-year increase of 0.6%, attributed to an enriched product catalog and improved user experience[42] - Pharmaceutical e-commerce platform business revenue totaled RMB 2,329,471,000, a year-on-year increase of 4.1%, following the acquisition of advertising operations for Tmall Health category merchants[43] - Medical health and digital services business revenue was RMB 957,838,000, a year-on-year increase of 2.6%, supported by the expansion of digital services and increased retail terminal coverage[45] - Gross profit for the reporting period was RMB 5,895,321,000, an increase of RMB 193,987,000 or 3.4% compared to the same period last year, with a gross margin of 21.8%, up from 21.3% due to operational efficiency improvements[46] - Adjusted net profit for the reporting period was RMB 1,437,928,000, an increase of RMB 684,313,000 compared to the previous fiscal year, driven by growth in the pharmaceutical self-operated business user base, improved pricing and operational efficiency, and economies of scale[57] Leadership and Corporate Governance - Leadership changes, including the appointment of a new CEO, Shen Difan, effective November 28, 2023[5] - Board restructuring with new appointments and resignations, reflecting strategic realignment[5] - Commitment to corporate governance and risk management, as highlighted in the annual report[5] - Huang Jiaojiao was appointed as a non-executive director and member of the Remuneration Committee on May 15, 2023, replacing Li Faguang[98] - Shao Rong and Wu Yihong were appointed as independent non-executive directors and members of the Audit and Nomination Committees on August 11, 2023, replacing Luo Tong and Huang Jing'an[100] - Xu Haipeng was appointed as a non-executive director on October 19, 2023[100] - Shen Difan was appointed as CEO and authorized representative on November 28, 2023, replacing Zhu Shunyan[100] - Shao Rong was appointed as an independent director of Shanghai Yinuosi Biotechnology Co., Ltd. (A-share code: A06142) in December 2023[100] - Wu Yihong was appointed as an independent director and chair of the Audit Committee of MakeMyTrip Limited (NASDAQ: MMYT) on May 15, 2024[100] - The company has three independent non-executive directors, accounting for at least one-third of the board[103] - The board, Audit Committee, and Remuneration Committee fully comply with the relevant Listing Rules[103] - Directors' remuneration is determined based on the company's operating performance, individual performance, and comparable market statistics[105] Operational and Strategic Developments - Registered office and primary business locations in Bermuda, Hong Kong, and Beijing, supporting global operations[6] - Key banking relationships with institutions such as CITIC Bank International and HSBC, ensuring financial stability[7] - Annual active users of Tmall Health platform reached 300 million, with over 35,000 merchants served, a year-on-year increase of 28%[11] - The company completed the acquisition of advertising operation rights for Tmall Health category merchants from Alibaba Group for a total consideration of HKD 13.5 billion[11] - Ali Health's online self-operated stores accumulated a total of 77 million user members as of March 31, 2024[11] - The company upgraded its logistics network, enhancing next-day delivery services in key cities like Shanghai, Hangzhou, Suzhou, Wuxi, and Changzhou[11] - The company's online inventory units (SKUs) achieved double-digit growth during the reporting period[26] - The company's slow disease user DOT duration increased by 7.6% year-over-year[26] - The company's self-operated pharmaceutical business saw significant growth, with personal care, health, and massage equipment categories increasing by over 50% year-over-year, and medical devices (orthopedic supports) growing by 68.3%[28] - The company plans to continue optimizing operational efficiency and digital capabilities in its pharmaceutical e-commerce business, aiming to become the preferred platform for health consumption[38] - The company completed the acquisition of AJK Technology Holding Limited during the reporting period[74] - The company has no significant investments or capital asset plans as of the report date[75] Shareholder and Equity Information - The company issued 2,558,222,222 shares to Taobao Holding Limited as part of the consideration for acquiring AJK Technology Holding Limited, with no cash proceeds generated[88] - The company raised approximately HKD 10,000.0 million through a share placement in 2020, with net proceeds of HKD 9,964.2 million, used for developing healthcare products and digital infrastructure[89] - As of March 31, 2024, the company had utilized HKD 3,474.1 million of the net proceeds for healthcare product development and HKD 199.6 million for digital infrastructure, with remaining funds expected to be used by March 31, 2027[91] - The company's share premium account, amounting to approximately RMB 51,374,724,000, is available for distribution as fully paid bonus shares[94] - Alibaba Group holds a 63.83% stake in the company with 10,271,540,755 shares[137] - Perfect Advance Holding Limited owns 19.29% of the company with 3,103,816,661 shares[137] - Ali JK Nutritional Products Holding Limited holds 28.34% of the company with 4,560,785,407 shares[137] - Taobao Holding Limited owns 15.90% of the company with 2,558,222,222 shares[137] - The company issued 2,558,222,222 shares to Taobao Holding Limited as part of a share purchase agreement[139] - The total issued ordinary shares of the company as of March 31, 2024, are 16,091,736,264[139] - The company completed a share purchase agreement with Taobao Holding Limited for a total consideration of HKD 13.5 billion[141] - The company paid HKD 2 billion in cash and issued 2,558,222,222 shares to Taobao Holding Limited as part of the acquisition[141] - The company completed the acquisition of the target business, issuing 2,558,222,222 consideration shares at HK$4.50 per share, making the target company a wholly-owned subsidiary[143] Contracts and Agreements - The company entered into a lease agreement for a pharmaceutical logistics park in Hangzhou, with annual rent and property management fees capped at RMB 28.5 million, RMB 29.7 million, and RMB 30.9 million for the three-year term[144] - The company renewed its cloud computing service agreement with Alibaba Cloud, with an annual service fee cap of RMB 160 million for 2024 and RMB 170 million for 2025[147] - The company signed a renewed entrusted service framework agreement with Taobao Holding, with an annual service fee cap of RMB 200 million for 2024[150] - The company entered into a new three-year entrusted service agreement with Tmall entities, with annual service fee caps of RMB 215 million, RMB 230 million, and RMB 245 million for 2025-2027 respectively[150] - The company's service fee income from the 2024 and 2025-2027 delegated service agreements is expected to be a stable source of revenue growth, with the 2024 delegated service framework agreement generating a service fee of approximately RMB 311.0 million (compared to RMB 267.0 million in the same period last year)[153] - The annual service fee cap for the 2024 platform service framework agreement is RMB 600 million, with actual service fees amounting to RMB 311.0 million for the year ending March 31, 2024[153] - The annual service fee caps for the 2025-2027 platform service framework agreement are RMB 630 million, RMB 670 million, and RMB 710 million for the years ending March 31, 2025, 2026, and 2027, respectively[153] - The company expects to reach more customers and deepen its understanding of customer needs through the 2024 and 2025-2027 platform service framework agreements, promoting the circulation of pharmaceutical and health-related products[155] - The 2024 logistics service framework agreement has an annual service fee cap of RMB 420 million, with actual service fees amounting to RMB 175.1 million for the year ending March 31, 2024 (compared to RMB 225.2 million in the same period last year)[158] - The annual service fee caps for the 2025-2027 logistics service framework agreement are RMB 320 million, RMB 350 million, and RMB 380 million for the years ending March 31, 2025, 2026, and 2027, respectively[158] - The company aims to leverage Cainiao Group's logistics data platform and global distribution network to provide efficient and reliable domestic and international logistics services through the 2024 and 2025-2027 logistics service framework agreements[158] - The company renewed the Shared Services Agreement with Alibaba Holding, with an annual cap of RMB 549.5 million for services provided to the company and RMB 162 million for services provided to Alibaba Group[159] - The total service fees generated under the 2024 Shared Services Agreement were RMB 284.1 million for services provided to the company and RMB 0.4 million for services provided to Alibaba Group[159] - The company renewed the Shared Services Agreement with Alibaba Network, with annual caps of RMB 540 million, RMB 560 million, and RMB 580 million for services provided to the company over the next three years[160] - The company renewed the Framework Technical Services Agreement with Tmall, with an annual cap of RMB 1,400 million, and the total service fees generated were RMB 792.4 million[163] - The company renewed the Taobao Framework Technical Services Agreement, with an annual cap of RMB 620 million, and the total service fees generated were RMB 327.6 million[163] - The company renewed the Framework Technical Services Agreement with Taobao China, with annual caps of RMB 2,300 million, RMB 2,530 million, and RMB 2,783 million for the next three years[165] - The annual service fee cap under the 2024 Payment Service Framework Agreement is RMB 137 million, with actual service fees incurred during the reporting period amounting to RMB 75.4 million (compared to RMB 78.8 million in the same period last year)[167] - The 2025 Payment Service Framework Agreement, effective from April 1, 2024, to March 31, 2025, also has an annual service fee cap of RMB 137 million[167] - The Exclusive Service Framework Agreement has proposed annual fee caps of RMB 391 million, RMB 2,032 million, and RMB 2,641 million for the fiscal years ending March 31, 2024, 2025, and 2026, respectively, with actual service fees of RMB 239.5 million incurred during the reporting period[168] - The 2024 Advertising Service Framework Agreement has an annual service fee cap of RMB 2,220 million, with actual service fees of RMB 1,566.3 million incurred during the reporting period (compared to RMB 1,046.2 million in the same period last year)[170] - The 2025-2027 Marketing Promotion Service Framework Agreement sets annual service fee caps of RMB 2,400 million, RMB 2,640 million, and RMB 2,904 million for the fiscal years ending March 31, 2025, 2026, and 2027, respectively[170] - The company signed a renewed software service framework agreement with Taobao Group, with an annual service fee cap of RMB 140 million for 2024, and actual service fees generated amounted to RMB 98.3 million (compared to RMB 100.2 million in the same period last year)[171] - A new three-year software service framework agreement with Taobao China Group was established, with annual service fee caps of RMB 150 million, RMB 160 million, and RMB 170 million for 2025, 2026, and 2027 respectively[171] - The company expects the agreements with Taobao Group and Taobao China Group to enhance revenue generation, optimize resources, and expand market share in the healthcare sector[171] - A two-year service framework agreement with Koubei Shanghai was signed, with annual service fee caps of RMB 30 million for both 2024 and 2025, and actual service fees generated in the reporting period were RMB 5.3 million (compared to RMB 0.01 million in the same period last year)[173] - The agreement with Koubei Shanghai is expected to improve user experience, operational capabilities, and market share in the health and pharmaceutical industries[173] - A three-year equity settlement framework agreement with Alibaba Holding was established, with annual caps of RMB 35 million for both payable and receivable amounts related to equity incentives for 2025, 2026, and 2027[174] - The equity settlement framework agreement aims to retain employee incentives during internal transfers and allocate equity incentive costs appropriately between the company and Alibaba Holding[176] Risk Management and Compliance - The company has implemented internal control procedures to ensure fair and reasonable pricing for continuous connected transactions, with independent reviews by internal audit functions and confirmation by independent non-executive directors[176] - The company has established contractual arrangements to maintain effective control over its operating companies, Hongyun Jiukang and Ali Health Hebei, through its wholly-owned subsidiary, Ali Health Technology (China) Co., Ltd., ensuring full economic benefits despite foreign investment restrictions in China[177] - The VIE restructuring in April 2020 transferred 100% ownership of the operating companies to Beijing Jiukangbao Technology Co., Ltd., which is ultimately controlled by Chinese citizens and entities[179] - As of March 31, 2024, Hongyun Jiukang has a registered capital of RMB 40 million, while Ali Health Hebei has a registered capital of RMB 10 million[181] - Hongyun Jiukang owns 100% of several subsidiaries, including Ali Health (Hainan) Internet Hospital Co., Ltd. and Ali Health Technology (Guangzhou) Co., Ltd., all engaged in internet information services and related businesses[182][184] - The contractual arrangements include exclusive service agreements with a 20-year term, automatically renewable for one year, granting the foreign-owned enterprise exclusive rights to intellectual property developed during service provision[187] - Revenue from Hongyun Jiukang for the fiscal year ending March 31, 2024, was RMB 820.852 million, accounting for 3.04% of the group's total revenue[194] - Assets of Hongyun Jiukang as of March 31, 2024, were RMB 1.498 billion, representing 7.60% of the group's total assets[194] - Assets of Ali Health Hebei as of March 31, 2024, were RMB 81.401 million, accounting for 0.41% of the group's total assets[194] - The loan agreement stipulates a 20-year term for loans provided to registered owners, with repayment required upon maturity or at the discretion of the foreign-invested enterprise[188] - The equity pledge agreement requires registered owners to pledge all their equity in the relevant operating companies as collateral for the loans[190] - The shareholder voting rights agreement grants the foreign-invested enterprise the exclusive right to exercise voting rights on behalf of registered owners for 20 years, with automatic annual renewal unless otherwise notified[191] - The exclusive purchase right agreement allows the foreign-invested enterprise to purchase all or part of the equity and assets of the relevant operating companies at a price consistent with registered capital or net asset value[192] - The group's revenue and assets from operating companies under contractual arrangements have become a significant part of the group's total revenue and assets[193] - The group uses contractual arrangements to participate in restricted businesses due to limitations under Chinese laws and regulations on foreign investment in ICP and restricted businesses[196] - The company faces risks related to contractual arrangements in China, including potential penalties, unenforceable terms, and loss of control over restricted businesses[197] - The company may incur additional costs and resources to enforce contractual arrangements if operational companies fail to comply[197] - Potential conflicts of interest between the company

Investment Rating - The report assigns a Buy rating to Alibaba Health (ALH) and a Neutral rating to JD Health (JDH) [2][3]. Core Insights - The China Online Health sector is expected to stabilize after an 80% share price correction since 2021, with revenue growth projected at mid-teens to 20% year-on-year from 2020 to 2024, alongside improved visibility on earnings per share (EPS) revisions [2][3][11]. - The report identifies three key debates: competition in pharmacy eCommerce, profitability and capital allocation strategies, and the sales/earnings revision cycle for both ALH and JDH [2][14]. Summary by Sections Investment Thesis and Price Targets - Alibaba Health is resumed at a target price of HK$4.4, indicating a 26% upside potential, with expectations of 15% sales CAGR and a significant earnings CAGR of 60% [3][11]. - JD Health is resumed at a target price of HK$30, indicating a 22% upside potential, with expected sales and operating profit CAGRs of 18% and 26% respectively [3][11]. Market Overview - The online health market is projected to reach RMB 360 billion in GMV by 2023, with a CAGR of 16% from 2023 to 2026, driven by healthcare digitalization and supportive policies [7][22]. - The penetration of the drug category is expected to increase from 7% to 10% by 2026, indicating significant growth potential [7][22]. Competitive Landscape - Both ALH and JDH are expected to maintain competitive advantages through scale benefits, supply chain efficiency, and strong advertising support from their parent companies [2][3][11]. - The online pharmacy sector is characterized by intense competition, with both companies competing against offline pharmacies and new entrants in the online space [22][31]. Profitability and Capital Allocation - ALH is expected to achieve higher margin visibility over the next two years, with an estimated operating profit margin (OPM) increase of 360 basis points [3][11]. - JDH's margins are projected to remain flat in the near term due to investments in pricing promotions and supply chain improvements [3][11]. Growth Drivers - Key growth drivers for ALH include user penetration from its parent company, improvements in average revenue per user (ARPU), and a focus on non-drug categories with higher margins [12][13]. - JDH is expected to leverage its strong supply chain and logistics capabilities to maintain its market position, with a focus on onboarding new drugs and enhancing its online-to-offline (O2O) delivery model [12][13]. Earnings Revision Cycle - The report suggests that the downward revision cycle for the sector is nearing its end, with expectations of revenue growth re-accelerating in the second half of 2024 [22][31].

Investment Rating - The report maintains an "OUTPERFORM" rating for AliHealth with a target price of HKD 6.34 [3][5][12] Core Insights - The company's FY2024 performance exceeded market expectations, with revenue of CNY 27.03 billion, reflecting a 1.0% increase year-on-year. The self-operated pharmaceutical business generated CNY 23.74 billion, up 0.6% [11][12] - The gross margin improved to 21.8%, a 0.5 percentage point increase, while the fulfillment cost ratio was optimized to 8.9%, down 1.9 percentage points [11][12] - The report anticipates continued revenue growth driven by increased online service penetration, prescription outflow, and improved online medical insurance policies, projecting FY2025 revenue at CNY 31.16 billion, a 15.3% year-on-year increase [4][12] Financial Performance Summary - FY2024 net profit reached CNY 880 million, a 64.6% increase, with an adjusted net profit of approximately CNY 1.44 billion, up 90.8% [11][12] - The company expects net profits for FY2025 and FY2026 to be CNY 1.56 billion and CNY 1.96 billion, representing year-on-year growth of 76.3% and 25.6% respectively [4][12] - The report highlights a significant increase in interest income to CNY 480 million, a 44.4% rise [11][12] Valuation - The absolute valuation method estimates the company's equity value at CNY 105.328 billion, corresponding to a share price of HKD 6.34, based on a WACC of 7.8% and a perpetual growth rate of 3.5% [5][12]

Investment Rating - The report maintains a "Hold" rating for Alibaba Health with a target price of HK$4.0, indicating an expected upside of approximately 18% from the current price of HK$3.38 [3][5]. Core Insights - Alibaba Health's FY24 revenue is projected to grow by 1% year-on-year to RMB 27.03 billion, while adjusted net profit is expected to increase by 91% to RMB 1.44 billion, driven by improved fulfillment cost efficiency and a higher proportion of non-epidemic product sales [2][4]. - For FY25, the company anticipates revenue growth of at least 15% and an increase in net profit margin by approximately 5 percentage points, leading to a net profit growth of around 76% [2][4]. Summary by Sections Financial Performance - FY24 revenue is expected to be RMB 27.03 billion, with a year-on-year growth of 1%, impacted by a high base from epidemic-related product sales in FY23 [2][4]. - Adjusted net profit for FY24 is projected at RMB 1.44 billion, reflecting a significant increase of 91% due to improved gross margins and reduced fulfillment costs [2][4]. - Revenue breakdown for FY24 includes: - Self-operated business: RMB 23.74 billion, a 0.6% increase year-on-year, with non-epidemic product sales growing over 40% [2]. - E-commerce platform: RMB 2.33 billion, a 4% increase, benefiting from GMV growth and new acquisitions [2]. - Healthcare and digitalization: RMB 960 million, a 3% increase, despite optimization efforts in lower-margin businesses [2]. Future Outlook - The company expects continued optimization of fulfillment costs in FY25, with revenue growth no longer hindered by high base effects from epidemic-related sales [2][4]. - Management guidance for FY25 includes revenue growth of at least 15% and an increase in net profit margin to approximately 5%, translating to a net profit growth of at least 76% [2][4]. Valuation Metrics - The report assigns a target price of HK$4.0 based on a price-to-sales ratio of 1.9x for FY25E, which is approximately 0.5 standard deviations below the average of the past three years [3][5]. - The company’s market capitalization is reported at HK$49.4 billion, with an average trading volume of HK$142 million over the past three months [5].

Financial Performance - Total revenue for the fiscal year ended March 31, 2024, was RMB 27,026.6 million, a slight increase of 1.0% year-on-year[2]. - Net profit reached RMB 883.1 million, representing a significant year-on-year growth of 64.6%[2]. - The self-operated business revenue for the reporting period was RMB 23,739.2 million, a slight increase of 0.6% year-on-year, despite the high comparison base from the pandemic[11]. - Revenue from personal care, health, and massage equipment industries under the self-operated business grew by over 50%, while revenue from protective equipment increased by 68.3% year-on-year[12]. - The company's pharmaceutical self-operated business generated revenue of RMB 23,739,246,000, a year-on-year increase of 0.6%[22]. - Revenue from the pharmaceutical e-commerce platform business reached RMB 2,329,471,000, representing a growth of 4.1%[23]. - The medical health and digital services business reported revenue of RMB 957,838,000, an increase of 2.6% year-on-year[24]. - The company's revenue for the fiscal year 2024 reached RMB 27,026,555,000, an increase of RMB 263,539,000 or 1.0% compared to RMB 26,763,016,000 in the previous year[21]. - Gross profit amounted to RMB 5,895,321,000, reflecting a growth of RMB 193,987,000 or 3.4%, with a gross margin of 21.8%, up from 21.3% in the previous year[25]. - The total comprehensive income for the year was RMB 1,130.1 million, compared to RMB 852.2 million in the previous year, reflecting an increase of 32.6%[50]. User Engagement and Growth - The number of annual active users on the Tmall Health platform reached 300 million, with over 35,000 merchants served, a year-on-year increase of 28%[2]. - Cumulative membership for online self-operated stores grew to 77 million, with average revenue per user (ARPU) increasing by over 17% year-on-year[2]. - The average daily consultation volume (excluding prescriptions) increased to 11,045, with over 220,000 licensed healthcare professionals providing online health consultation services[2][6]. - The treatment duration (DOT) for chronic disease users increased by 7.6% year-on-year, indicating improved user experience[6]. - As of March 31, 2024, Tmall Health Platform has reached 300 million annual active users, with over 35,000 merchants served, representing a year-on-year growth of 28%[9]. Strategic Initiatives and Innovations - The company completed the acquisition of advertising operation rights for Tmall Health category merchants, enhancing its commercial service capabilities and significantly improving profitability[3][8]. - The company is focused on optimizing the "Internet + healthcare" service model, supported by national policies to enhance health service consumption[5][6]. - The company aims to leverage leading digital technologies and operational capabilities to provide accessible and efficient healthcare services[7]. - The company is committed to continuous innovation in the healthcare sector, aligning with government initiatives to explore new models in health management and primary care[6]. - The company successfully launched the first domestically produced GLP-1 drug, Liraglutide injection, for type 2 diabetes patients, enhancing treatment accessibility[12]. - The company has developed a self-researched large model for medical applications, significantly improving user satisfaction and accuracy in customer service[16]. Financial Position and Cash Flow - Cash and cash equivalents at the end of the reporting period were RMB 9,553,110,000, down from RMB 10,917,171,000 a year earlier[37]. - Net cash flow from operating activities was RMB 1,079,832,000, a substantial increase from RMB 255,690,000 in the previous year[38]. - Net cash used in investing activities was RMB 4,880,900,000, primarily due to an increase in time deposits with maturities over three months[40]. - Net cash used in financing activities was RMB 1,982,395,000, mainly due to cash outflows for the acquisition of jointly controlled subsidiaries[41]. - As of March 31, 2024, the company had no outstanding borrowings, resulting in a capital-to-debt ratio of zero[42]. - The company maintained a strong liquidity position, closely monitoring its cash flow to meet ongoing funding needs[43]. Expenses and Cost Management - Fulfillment expenses decreased by RMB 493,925,000 or 17.0%, totaling RMB 2,413,212,000, with fulfillment costs accounting for 10.2% of the pharmaceutical self-operated business revenue[26]. - Administrative expenses were reduced by RMB 19,507,000 or 5.1%, amounting to RMB 359,980,000, due to cost control measures[28]. - Product development expenses increased by RMB 27,560,000 or 4.1%, totaling RMB 705,382,000, driven by investments in technology research and development[29]. Governance and Compliance - The company has maintained compliance with corporate governance codes throughout the reporting period, ensuring shareholder interests are protected[81]. - The audit committee reviewed the annual performance, confirming that the financial statements align with the reported figures for the period[84]. - The company has adopted a securities trading code for directors and certain employees, ensuring compliance with insider trading regulations[82]. Leadership Changes - The new CEO, Shen Difan, was appointed effective November 28, 2023, following the resignation of the previous CEO, Zhu Shunyan[81].

Revenue and Growth - Total revenue for the six months ended September 30, 2023, was RMB 12,956.0 million, representing a year-on-year growth of 12.7%[8] - Revenue from the self-operated pharmaceutical business reached RMB 11,446.7 million, an increase of 13.5% year-on-year[8] - Revenue from medical health and digital services reached RMB 488.1 million, a year-on-year increase of 16.4%[14] - The company reported a total comprehensive income of RMB 830 million for the six months ended September 30, 2023, compared to RMB 698 million in the same period last year[83] - The company reported a net profit of RMB 162,194,000 for the period, compared to a loss of RMB 1,311,393,000 in the previous year, indicating a substantial turnaround[87] User Engagement and Market Presence - The number of online self-operated store user members reached 77 million, reflecting a year-on-year growth of 21.0%[8] - The Tmall Health platform offered over 64 million stock-keeping units (SKUs) and served more than 32,000 merchants[8] - The total number of contracted healthcare professionals providing online consultation services exceeded 210,000, an increase of nearly 30,000 compared to the same period last year[8] - The Tmall Health platform served over 32,000 merchants, an increase of more than 4,000 compared to September 30, 2022[11] Financial Performance - Gross profit reached RMB 2,869 million, up 24.7% from RMB 2,301 million year-over-year, with a gross margin of 22.1%, an increase of 2.1 percentage points[26] - Adjusted net profit for the reporting period was RMB 642,473,000, an increase from RMB 351,587,000 in the same period last year, driven by user growth and operational efficiency improvements[34][36] - Operating expenses increased to RMB 2,513 million, compared to RMB 2,131 million in the prior year, primarily due to higher sales and marketing expenses[82] Cash Flow and Liquidity - Net cash flow from operating activities was RMB 910,177,000, significantly up from RMB 504,049,000 in the same period last year[39] - Cash and cash equivalents as of September 30, 2023, were RMB 11,697,450,000, an increase from RMB 10,917,171,000 as of March 31, 2023[37] - The company’s cash flow from operating activities showed a strong performance, indicating robust operational efficiency and growth potential[89] Expenses and Cost Management - Fulfillment expenses for the self-operated pharmaceutical business were RMB 1,249 million, an increase of 28.1% from RMB 974 million, with fulfillment costs accounting for 10.9% of self-operated revenue, up from 9.7%[28] - Sales and marketing expenses for the reporting period were RMB 869,376,000, an increase of RMB 10,486,000 or 1.2% compared to RMB 858,890,000 in the same period last year, with the proportion of total revenue decreasing from 7.5% to 6.7%[29] - Administrative expenses decreased to RMB 169,531,000, down RMB 3,807,000 or 2.2% from RMB 173,338,000 in the same period last year, with the proportion of total revenue decreasing from 1.5% to 1.3%[30] Share Capital and Equity - The issued share capital as of September 30, 2023, was RMB 119,240,000, with 13,533,328,542 shares issued, compared to RMB 119,133,000 with 13,521,362,542 shares as of March 31, 2023[126] - The total number of shares available for share awards under the service provider limit is 1,347,159,007 shares, representing approximately 9.95% of the total issued shares[52] - The company has adopted a share incentive plan, which was revised on August 11, 2023, allowing the board to grant share awards to eligible participants[51] Corporate Governance and Compliance - The company has adopted the corporate governance code and has complied with all applicable code provisions during the reporting period, except for the dual role of the chairman and CEO[74] - The company will separate the roles of chairman and CEO effective November 28, 2023, with the appointment of a new CEO[75] - The company’s interim report for the reporting period was reviewed by the audit committee and independent auditor Ernst & Young, with no objections to the accounting treatment adopted[77] Investments and Future Plans - The company plans to allocate approximately HKD 996.4 million to further develop digital infrastructure and innovative businesses, with an expected remaining amount of HKD 980.5 million to be utilized by March 31, 2027[72] - The company is focused on exploring innovative business models and developing industry sectors based on customer needs[9] - The company aims to become a digital health management company serving 500 million people within five years, focusing on user-driven health management[19] Fair Value and Financial Instruments - The fair value of financial assets measured at fair value through profit or loss as of September 30, 2023, was RMB 1,883,292,000, with a total loss recognized in profit or loss of RMB 88,956,000 during the six months[152] - The fair value of equity investments measured at fair value through other comprehensive income decreased to RMB 116,891,000, with total losses recognized in other comprehensive income amounting to RMB 12,837,000[152] - The company believes that the estimated fair values derived from valuation techniques are reasonable and reflect the current market conditions[143]

Financial Performance - Total revenue for the six months ended September 30, 2023, reached approximately RMB 12,956 million, representing a year-on-year growth of 12.7%[2] - Gross profit for the same period was approximately RMB 2,868.7 million, with a gross margin of 22.1%[2] - Net profit for the period was approximately RMB 445.1 million, a significant increase of 172.2% compared to RMB 163.5 million in the same period last year[2] - Adjusted net profit for the period was RMB 642.5 million, an increase of 82.7% from RMB 351.6 million in the previous year[4] - The group's revenue for the period ended September 30, 2023, was RMB 12,956 million, an increase of RMB 1,455 million or 12.7% compared to RMB 11,500 million for the same period in 2022[19] - Gross profit for the period was RMB 2,868 million, representing an increase of RMB 568 million or 24.7% from RMB 2,300 million in the previous year, with a gross margin of 22.1%, up 2.1 percentage points[23] - The self-operated pharmaceutical business generated revenue of RMB 11,446.7 million, with a year-on-year increase of 13.5%[10] - Revenue from the medical health and digital services business was RMB 488 million, reflecting a growth of 16.4% year-on-year, supported by the stable development of the "Code on Trust" traceability platform[22] - The company reported revenue of RMB 12,956,000, an increase from RMB 11,500,569 in the previous year, representing a growth of approximately 12.7%[45] - The net profit for the period was RMB 445,143, compared to RMB 163,509 in the previous year, reflecting a significant increase of approximately 172.5%[46] - The total comprehensive income for the period was RMB 830,812, compared to RMB 697,694 in the previous year, showing an increase of approximately 19%[46] User and Market Growth - The number of online self-operated store user members reached 77 million, reflecting a year-on-year growth of 21.0%[3] - The Tmall Health platform served over 32,000 merchants, an increase of over 4,000 compared to the same date last year, with over 6,400 SKUs available[3] - The number of online self-operated store users reached 77 million, reflecting a year-on-year growth of 21.0%[10] - The number of merchants served on the Tmall Health platform exceeded 32,000, an increase of over 4,000 compared to the same period last year[9] - The Tmall Health platform now offers over 64 million SKUs, which is an increase of more than 16 million from the previous year[9] - The number of practitioners providing online health consultation services exceeded 210,000, an increase of over 30,000 compared to the same period last year[12] - The company has expanded its digital patient management capabilities to cover 20 core disease areas, collaborating with 40 well-known pharmaceutical companies[13] Strategic Initiatives - The company is actively enhancing its compliance with new regulations in the internet healthcare sector, which supports its long-term value creation for users[5] - The company has expanded its digital health services, integrating various online and offline healthcare services across multiple platforms[3] - Strategic collaborations with global pharmaceutical companies are being deepened to explore long-term value in the digital health sector[3] - The company is actively exploring innovative business models and expanding its market presence in the health sector, leveraging digital technology and operational capabilities[6] - The company aims to become a digital health management company serving 500 million people within five years, leveraging internet technology for proactive health management[17] - The company is exploring innovative healthcare service models and enhancing its AI capabilities in the medical vertical under regulatory guidance[17] Financial Position and Cash Flow - The net cash flow from operating activities was RMB 910,177,000, attributed to a pre-tax profit of RMB 481,271,000 and various adjustments including non-cash expenses[36] - The net cash flow used in investing activities was RMB 979,406,000, mainly due to an increase in time deposits exceeding three months and cash used for purchasing financial assets[37] - Cash and cash equivalents as of September 30, 2023, were RMB 11,697,450,000, up from RMB 10,917,171,000 as of March 31, 2023[34] - The net cash flow used in financing activities for the reporting period was RMB 30,112,000, primarily due to lease principal payments of RMB 16,696,000 and stock repurchase payments of RMB 13,587,000[38] - As of September 30, 2023, the company had no outstanding borrowings, resulting in a capital-to-debt ratio of 0%[39] - The total employee cost for the reporting period was RMB 572.6 million, a decrease from RMB 630.3 million for the same period in 2022[42] - The company maintained a strong liquidity position, closely monitoring its cash flow to meet ongoing funding needs[40] Expenses and Liabilities - Fulfillment expenses for the pharmaceutical self-operated business amounted to RMB 1,248,808,000, an increase of RMB 274,317,000 or 28.1% compared to RMB 974,491,000 in the same period last year, with fulfillment costs accounting for 10.9% of the pharmaceutical self-operated business revenue, up from 9.7%[25] - Sales and marketing expenses were RMB 869,376,000, a slight increase of RMB 10,486,000 or 1.2% from RMB 858,890,000, while the proportion of total revenue decreased from 7.5% to 6.7% due to optimized promotional and advertising strategies[26] - Administrative expenses decreased to RMB 169,531,000, down RMB 3,807,000 or 2.2% from RMB 173,338,000, with the proportion of total revenue declining from 1.5% to 1.3%[27] - Product development expenses were RMB 319,314,000, a decrease of RMB 4,672,000 or 1.4% from RMB 323,986,000, with the proportion of total revenue declining from 2.8% to 2.5%[28] - The total tax expense for the six months ended September 30, 2023, was RMB 36,128,000, up from RMB 10,466,000 in the same period of 2022, reflecting an increase of approximately 245.5%[72] - The group’s employee benefits expenses totaled RMB 572,590,000 for the six months ended September 30, 2023, down from RMB 630,303,000 for the same period in 2022, reflecting a decrease of approximately 9.2%[71] Corporate Governance - The company has adopted the corporate governance code as per the Hong Kong Stock Exchange's listing rules, ensuring high standards of corporate governance[82] - The roles of the Chairman and CEO are currently held by the same individual, Mr. Zhu Shunyan, since March 16, 2020, to ensure effective leadership and strategy implementation[82] - The interim results for the reporting period have not been audited but have been reviewed by the audit committee and independent auditor, Ernst & Young[86] - The interim report will be sent to shareholders and published on the company's website in due course[87]