The company's recent situation
The company's stock price has been adjusted quite a bit recently. Our comments on the company's recent business performance are as follows.
reviews
Compliance and supervision is an important direction for the development of the industry, and the safety guarantee for online medical treatment and drug purchases continues to be strengthened. In 2018, the General Office of the State Council issued a document proposing to allow online follow-up for some common and chronic diseases, affirming the value of the industry; at the same time, on August 20, the People's Daily published a review emphasizing the safety of Internet prescription medication. As patient and consumer behavior gradually shifts online, the importance of medication safety issues continues to be highlighted. We believe that the act of purchasing medicines online needs to be based on compliance development to fully guarantee the safety of all aspects of online medical treatment and drug purchases. Ali Health has previously implemented AI systems for safe medication use and safe medication use plans for families in China. We anticipate that the company may continue to increase its service and business investment in online medical drug purchases to ensure the safety of medicine purchases to further implement professional and safe health management needs for patients.
Competitors are entering the market at an accelerated pace, and the business layout centered on patient needs is the company's core competitiveness. We have noticed that since 2020, various companies in the digital health industry have entered the market at an accelerated pace. Companies such as JD Health, Ping An Health, and Meituan Pharmaceutical have continued to expand their businesses. While the scale of the industry has continued to expand, they have also welcomed many competitors. Since June 2021, the company has joined hands with many organizations to gradually launch “Hepatitis B Insurance”, the country's first one-million medical insurance service for hepatitis B patients, and to create an innovative and inclusive medical service model for early cancer screening with “Internet platform+early tumor screening technology+medical insurance” as the core. We believe that the business layout centered on meeting patients' needs is the core competitiveness of the company's development. By continuously improving the business layout in various sectors, the company is expected to continue to strengthen business barriers, provide specialized products and services to patients and users, and achieve reasonable monetization while providing health management value output.
The level of importance of localization has increased, and user needs have diversified. National health insurance is the largest payer in China's healthcare system at this stage. It has the characteristics of territorial management. Health insurance reimbursement policies vary from region to region. We anticipate that it may be difficult to implement a unified online payment policy across the country in the short term. We believe that user needs are reflected in diversification, and that the pharmaceutical 020 distribution model accounts for an important part of the implementation of patient and user needs. At this stage, Ali Health's layout in this field may still need to be further improved.
Valuation and advice
Considering that the company's many business developments still require resource investment, we lowered our revenue for the 2022/2023 fiscal year by 6%/10% to 22.2 billion/30.7 billion yuan, and the net profit attributable to the parent by 20%/26% to 240 million/370 million yuan. Considering recent market fluctuations and the overall decline in the sector valuation center, we lowered our target market value by 46% to HK$203.5 billion (target price of HK$15.1, based on the SOTP valuation method). There is room for an increase of 51.5% compared to the latest closing price.
risks
Policy environment supervision has exceeded expectations; business progress has fallen short of expectations.