Stricter rules will help the industry develop healthily in the long term
Recently, the China Drug Administration has finished soliciting comments on the “Measures for Supervision and Administration of Online Drug Sales” (draft submitted for review). Compared to the previous version introduced, the new management regulations are more strict on the supervision of drugs sold online. They expand the scope of the ban on online sales of prescription drugs (for example, pregnancy termination drugs, injections, infusions, etc.); until prescriptions are obtained, the platform is not allowed to show users detailed prescription drug information (only basic information such as generic names, dosage forms, prices, etc. of prescription drugs); and it will connect third-party delivery platforms to localized supervision systems. We believe that this new management method shows that the government still adheres to its previous cautious attitude towards the Internet medical industry; it is possible that the industry will suffer short-term pain. However, we believe that prudent policies are conducive to the long-term healthy and stable development of the industry.
Strengthen basic investments to meet demand
As one of the leaders in the Internet medical industry, Ali Health has long been committed to infrastructure investment in the Internet medical ecosystem, from building a prescription circulation platform to expanding the physical DTP network. The company's two major online platforms, the Yilu App and Alipay Healthcare Channel, can now empower all commercial channels of Alibaba (BABA US) and provide customers with various O2O medical services. Furthermore, the company will continue to explore the high-potential health management market through its chronic illness benefit program. Although the company is still in the investment stage of Internet medical infrastructure construction in the short term, we believe that the company's investment will be effectively transformed into the core competitiveness of its platform and help the company stay ahead of its peers.
Maintaining the buying rating, the target price was lowered to HK$18.8
We lowered our revenue forecasts for fiscal year 22/23 by 11% and 19%, respectively, to reflect that tighter policies will adversely affect the company's short-term growth prospects. At the same time, we predict that it will be more difficult for the company to achieve break-even (unadjusted) during fiscal year 22-24. The main thing is that we think the company will continue to invest in infrastructure to maintain competitiveness and cope with policy changes. Maintaining the buying rating, we believe that the company is more competitive in the new regulatory situation and can obtain more development opportunities in the long run.