Bank of America Securities: Lowering the target price of Ali Health (00241) by 17.6% to HK$4.2, reaffirming the “buy” rating

The Zhitong Finance App learned that Bank of America Securities released a research report saying that due to reduced platform subsidies and weak non-pharmaceutical business performance, the revenue forecast for Ali Health (00241) for the 2027 fiscal year was lowered by 4% to 37.4 billion yuan, an increase of 9% year on year; the adjusted net profit forecast was lowered by 5% to 2.1 billion yuan, a decrease of 10% year on year. The target price for Ali Health was lowered by 17.6% from HK$5.1 to HK$4.2, reaffirming the “buy” rating.

Despite the company's recent CEO change, the bank expects medical AI and omnichannel drug retail to remain the company's core strategies and enhance its long-term competitiveness and growth potential. Based on the revised profit forecast and the resulting slowdown in free cash flow growth expectations for the 2024-2031 fiscal year (from 39% to 32%), the bank lowered Ali Health's target price. Despite this, Ali Health is still a key beneficiary of the digitalization of the pharmaceutical retail industry. The bank expects Alibaba Health's revenue for the first half of fiscal year 2027 to be RMB 18.1 billion (up 8% year on year) and adjusted net profit of RMB 1.16 billion (down 15% year over year), mainly affected by investment in medical AI and omnichannel drug retail strategies.