Morning Star: Lowering the fair value of Ali Health (00241) to HK$4, more optimistic about JD Health (06618)

The Zhitong Finance App learned that Morningstar released a research report stating that the fair value forecast for Ali Health (00241) was lowered by 25.9%, from HK$5.4 to HK$4, and the sales growth forecast for the 2027-2030 fiscal year was lowered to 9%. Although it maintains a “narrow moat” due to network effects and low customer acquisition costs, the bank is more optimistic about JD Health (06618) in the healthcare e-commerce field.

Ali Health announced on Friday that revenue growth for the first half of fiscal year 2027 is expected to slow down to a high single digit from the 10-15% range previously anticipated. The company attributed weak sales of related products due to the tightening of overseas health product regulations, as well as poor medical device sales performance as expected.

The bank lowered the company's revenue growth forecast for the 2027 fiscal year from 15% to 9%, and expected net profit to be the same as the previous year, which is in line with the company's guidelines. Given the company's increased investment in AI capabilities and ongoing marketing activities to increase patient engagement, the bank expects operating expenses to rise. The year-on-year growth rate of Ali Health's revenue for the half year of the previous fiscal year slowed to 8%; Friday's forecast once again raised market concerns about a long-term slowdown in growth, as the company indicated that the increase in medical equipment sales was temporary and mainly benefited from government subsidies, which have now expired. The company said sales of health products may return to normal in FY2028, but since it had previously anticipated that sales growth would rise to 15% per year after the pandemic, Morningstar said it hoped to see continued growth in sales in FY2027 before adjusting the outlook.