ALIBABA HEALTH INFORMATION TECH LTD stock forum
241 FY25 Growth Projections
Ali Health has provided guidance for 10% year-over-year revenue growth and a 5.5% net margin for FY25. Although the company has lowered its revenue growth projection from 15% to 10% due to a weaker-than-expected business environment, it expects to maintain robust adjusted net earnings growth with a compound annual growth rate (CAGR) of 33% over FY25-27. This is driven by strong demand for healthcare products and synergies from Alimama’s marketing business.
Optimism on Prescription Drugs
While the prescription drug business underperformed in the first half of FY25 due to weaker demand for some loss-making products, Ali Health remains optimistic about long-term growth. The company is adjusting its product mix, focusing on higher-margin products like GLP-1 and newly approved innovative drugs, such as semaglutide. It expects a stronger performance from this segment in the second half of FY25 and beyond.
Financial Position and Cash Flow
As of March 2024, Ali Health holds a strong cash position with RMB 9.55 billion in cash. Operating cash flow surged by 322% year-over-year, reaching RMB 1.08 billion. This cash reserve provides ample resources to support business expansion, especially in high-margin non-drug products and digital upgrades.
Earnings Projections and Forecast
UOB Kay Hian revised its FY25 revenue and adjusted earnings growth estimates downward to reflect Ali Health’s updated guidance. The broker now expects 10.1% year-over-year revenue growth and 34.2% adjusted earnings growth. Over the FY25-27 period, Ali Health’s revenue and adjusted net profit are projected to grow at a 15% and 33% CAGR, respectively.
The company remains well-positioned to capitalize on strong demand for healthcare products, improved operations, and continued synergies from its marketing business.
Valuation and Recommendation
UOB Kay Hian maintains a “BUY” rating for Ali Health, raising its target price to HK$4.70, based on a 2.1x FY25F Price-to-Sales (P/S) ratio, implying a 31.7x FY25F Price-to-Earnings (PE) ratio. The stock is currently trading at a discount compared to its peer JD Health, which trades at 1.5x P/S and 22.6x PE. The broker sees solid demand for healthcare products, a positive earnings outlook, and significant synergies from Alimama’s marketing business as key growth drivers.
Share Price Catalysts
Potential catalysts for the stock include solid FY25 revenue growth, strong demand for non-drug healthcare products, and continued synergies from its marketing business. Thank you