HTSC·2025-05-21 13:30Investment Rating - The investment rating for the company is "Buy" with a target price of HKD 5.43 [9][10]. Core Insights - The company reported a total revenue of RMB 16.3 billion for 2HFY25, representing a year-on-year growth of 16.0%, which exceeded the consensus expectation of 12.6%. Adjusted net profit was RMB 970 million, a year-on-year increase of 22.2%, but below the consensus expectation of 11.0% [1]. - Future profit growth is expected to rely primarily on organic business growth as the impact of advertising business integration diminishes. Key areas to monitor include the recovery of demand across various pharmaceutical e-commerce categories, the progress of Taobao's instant retail strategy, and advancements in medical AI technology [1][2][4]. Revenue and Profitability - The company's self-operated business revenue for 2HFY25 was RMB 14 billion, up 13.9% year-on-year, surpassing the consensus expectation of 9.1%. The pharmaceutical e-commerce platform business generated RMB 1.9 billion, a growth of 43.6%, although it fell short of the expected 57.7% [2]. - The management indicated that the integration of the advertising business has enhanced service capabilities for platform merchants, leading to improved operational returns and increased competitiveness in the pharmaceutical health e-commerce sector [2][3]. Business Strategy and Guidance - The management has set a revenue growth target of 5-10% for FY26, with adjusted net profit growth projected at 10-20%. The focus will be on enhancing merchant empowerment and user experience in traditional core businesses while seeking new growth points in innovative businesses such as medical AI [4][5]. - The company aims to improve profitability in mature businesses while exploring new growth avenues through innovative initiatives like "Code Assurance" and "Little Deer Traditional Chinese Medicine" [3][4]. Financial Forecasts and Valuation - Adjustments to the FY26-27 adjusted net profit forecasts have been made, with a decrease of 8.8% and 8.4% to RMB 2.3 billion and RMB 2.6 billion, respectively. A new forecast for FY28 has been introduced at RMB 2.9 billion [5][14]. - The company is assigned a target non-IFRS PE of 35x for FY26, reflecting a premium over comparable companies' average of 16.2x, driven by its market share acquisition and potential in medical AI [5][16].