Core Viewpoint - Alibaba Health reported a total revenue of 16.3 billion yuan for 2HFY25, representing a year-on-year increase of 16.0%, which exceeded the Visible Alpha consensus estimate of 12.6% [1] - Adjusted net profit was 970 million yuan, a year-on-year growth of 22.2%, but fell short of the consensus estimate of 11.0% [1] - Future profit growth is expected to rely on organic business growth as the impact of advertising business integration diminishes [1] Revenue Breakdown - The self-operated business generated revenue of 14 billion yuan in 2HFY25, up 13.9% year-on-year, outperforming the consensus estimate of 9.1% [2] - The pharmaceutical e-commerce platform business revenue was 1.9 billion yuan, showing a year-on-year growth of 43.6%, but below the consensus estimate of 57.7% [2] - The number of SKUs in the self-operated business increased by 33.6% year-on-year to 1.23 million [2] Business Development and Strategy - The integration of advertising business has enhanced the service capabilities for platform merchants, leading to improved operational returns and increased competitiveness in the pharmaceutical e-commerce sector [2] - Management indicated that the growth effect from Taobao's flash purchase exceeded expectations, suggesting a dual adaptation strategy for both remote and near-field models in the pharmaceutical health sector [2] Innovation and Future Guidance - The company reported stable growth in GMV for self-operated and platform businesses, with a focus on cost reduction and efficiency improvement [3] - Innovative businesses like "Code on Trust" and "Little Deer Traditional Chinese Medicine" have shown development, with "Code on Trust" covering a vast network of users and generating initial revenue [3] - The revenue growth target for FY26 is set at 5-10%, with adjusted net profit growth expected at 10-20% [3] Profit Forecast and Valuation - Adjusted net profit forecasts for FY26-27 have been revised down by 8.8% and 8.4% to 2.3 billion yuan and 2.6 billion yuan, respectively, with a new FY28 forecast introduced at 2.9 billion yuan [3] - The company is assigned a target non-IFRS PE of 35x, reflecting a premium over the comparable company's average of 16.2x for 2026, considering the ongoing market share acquisition and potential in medical AI [3] - The target price is set at 5.43 HKD, up from a previous value of 4.4 HKD [3]

Investment 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].

Investment 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%. However, the adjusted net profit of RMB 970 million was below the expected RMB 1.1 billion, indicating that future profit growth will rely on organic business growth as the impact of advertising business integration diminishes [1][2]. - The management has set a revenue growth target of 5-10% for FY26, with an adjusted net profit growth target of 10-20%. The focus will be on enhancing merchant empowerment and user experience in core businesses while exploring new growth avenues in innovative sectors like medical AI [4][5]. Revenue and Profit Forecast - The company’s revenue is projected to reach RMB 33.6 billion in FY26, with a year-on-year growth rate of 9.9%. The adjusted net profit is expected to be RMB 2.2 billion, reflecting a growth rate of 17.6% [14][16]. - The adjusted net profit margin is forecasted to improve to 6.8% in FY26, up from previous estimates, indicating better operational efficiency [14][15]. Business Segments Performance - The self-operated business generated RMB 14 billion in revenue for 2HFY25, a year-on-year increase of 13.9%, outperforming the consensus estimate of 9.1%. The e-commerce platform business saw revenue of RMB 1.9 billion, growing 43.6% year-on-year, although it fell short of the expected 57.7% growth [2][3]. - The management highlighted that the integration of advertising business has enhanced service capabilities for platform merchants, leading to improved operational returns and competitiveness in the pharmaceutical e-commerce sector [2][3]. Valuation and Market Position - The company is assigned a target non-IFRS PE of 35x for FY26, which is a premium compared to the average of 16.2x for comparable companies, reflecting the company's ongoing market share acquisition and potential in medical AI [5][16]. - The target price has been revised to HKD 5.43 from a previous value of HKD 4.4, indicating a positive outlook based on the company's growth trajectory and market positioning [5][16].