Brief performance review
On November 28, 2023, the company disclosed its interim results for the 2024 fiscal year. Within the six months ending September 30, 2023, it achieved revenue of 12.956 billion yuan, an increase of 12.7% over the previous year; profit of 445 million yuan, an increase of 172.2% over the previous year.
Management analysis
Multiple business sectors develop collaboratively, and profitability continues to improve. By business, the company's pharmaceutical self-operated business achieved revenue of 11.447 billion yuan (+13.5% year-on-year), accounting for about 88% of total revenue; the pharmaceutical e-commerce platform business achieved revenue of 1,021 million yuan (+2.1% year-on-year); and the healthcare and digital services business achieved revenue of 488 million yuan (+16.4% year-on-year).
Due to the improvement of pricing capabilities and optimization of operating efficiency brought about by refined operations and digital upgrades, and the strengthening of drug purchasing mentality on user platforms brought about by upgrades in healthcare service processes and product experience, the company's profitability increased dramatically, achieving a gross profit margin of 22.1% (+2.1pcts).
The number of service clients continues to increase, and the service capacity continues to be upgraded. As the leading portal for health consumption in China, the Tmall Health platform has served more than 32,000 merchants and has more than 64 million SKUs in service categories, a rapid increase of more than 16 million over the same period last year. Relying on the company's brand advantages and the team's rich operating experience, as of September 30, 2023, the number of user members in online self-operated stores had reached 77 million, an increase of 21% over the previous year. As of September 30, 2023, the total number of licensed physicians, licensed pharmacists, and nutritionists who have signed contracts with the company to provide online health consultation services is more than 210,000, an increase of more than 30,000 over the same period (including the number of Fawn TCM doctors).
Ali Group, the majority shareholder, once again injected capital and obtained Ali Mama's rights in the healthcare category. At the same time, the company announced the signing of an equity subscription agreement with Alibaba Group to obtain exclusive marketing review rights and ancillary rights for Alibaba Mama's healthcare category at a consideration of HK$13.512 billion.
After the transaction is completed, Alibaba Group's shareholding ratio in the company will rise from 56.99% to 63.83%.
Profit Forecasts, Valuations, and Ratings
We predict that in 2023, 2024, and 2025 (that is, fiscal years 23/24, 24/25, and 25/26), the company's operating income will reach 316.56/365.57/41,528 billion yuan, a year-on-year increase of 18%/15%/14%, net profit of 7.21/9.66/1,214 billion yuan, a year-on-year increase of 35%/34%/26%. The current price corresponding to PE is 87/65/52 times, taking into account the unique advantages of the company's supply chain and group empowerment effects, maintaining the “increase in holdings” rating.
Risk warning
Policy risk; increased competition risk; prescription outflow progress falls short of expectations; risk of price limits for medical insurance drugs.