Lyon: Lowering the target price of Ali Health (00241) to HK$3.7, nutritional regulatory headwinds drag down revenue prospects

The Zhitong Finance App learned that Lyon released a research report saying that Ali Health (00241) lowered its revenue forecast for the 2027 fiscal year, mainly due to weak nutritional product sales due to subsidy cuts and regulatory headwinds, while drug sales are still steady, with a 10-digit increase over the previous year. The bank lowered its adjusted net profit forecast for the 2027-2028 fiscal year by 6% to 7%, and lowered the target price from HK$4.7 to HK$3.7, maintaining the “outperforming the market” rating.

Management lowered the 2027 revenue growth guide from 10% to 15% to 7% to 10%, mainly reflecting headwinds in nutrition regulations and reduced subsidies. However, management believes that sales of nutritional products have bottomed out, and it is expected that year-on-year unit growth will resume in the second half of FY2027 as merchants adapt to the new regulations. Medical device sales declined in the first half of fiscal year 2027, and the decline is expected to narrow at a lower base in the second half of the year. Pharmaceutical sales maintained a 10-digit year-on-year increase in the first half of the year, and management expects this to continue in the second half of the year.

The company plans to reinvest subsidy savings into supply chain and fulfillment infrastructure to accelerate B2C and O2O integration and strengthen the omnichannel pharmacy platform. The profit guidance remained unchanged at RMB 1.9 billion to RMB 2.3 billion, which meant a year-on-year decline of 18% to the same level. Management also pointed out that despite changes in leadership and the overall strategy, omni-channel pharmacy retail and medical AI are still two major strategic priorities.

Lyon lowered its revenue forecast for the 2027-2028 fiscal year by 4% to 5% and the adjusted net profit forecast by 6% to 9% to reflect weak sales of nutritional products under regulatory pressure. The bank believes that Ali Health is still one of the two main beneficiaries of the increase in the penetration rate of online drugs, but it favors JD Health (06618) because of its growth prospects and valuation, which is more attractive.