The Zhitong Finance App learned that CICC released a research report stating that it maintained the “outperforming industry” rating of Ali Health (00241), raised the 2025 FY profit forecast by 76.3% to 1.38 billion yuan, and introduced the 2026 FY profit forecast of 1.62 billion yuan for the first time, considering that the company's cost side narrowed and exceeded expectations. Considering the volatile overall valuation of the sector, the target price is HK$4.2. The company announced 2024FY results: revenue of $27.027 billion (+1.0% YoY), net profit to mother of 883 million yuan (+64.9% YoY), and adjusted net profit of $1,438 million (+90.8% YoY), corresponding to an adjusted profit margin of 5.3%. The adjusted net profit level exceeded expectations, mainly due to the narrowing of performance fees and changes in fair value related to transactional financial assets.
The main views of CICC are as follows:
Under a high base, the revenue side is under pressure, and 25FY may usher in an improvement.
By business segment, the company's own business achieved revenue of 23.739 billion yuan (+0.6% YoY), pharmaceutical e-commerce platform business revenue of 2,329 billion yuan (+4.1% YoY), and healthcare and digital business revenue of 958 million yuan (+2.6% YoY). By the end of 2024FY, the number of annual active users of the company's pharmaceutical e-commerce platform business reached 300 million, and the number of service merchants exceeded 35,000 (+28% YoY); the cumulative number of members in the company's online self-operated stores increased to 77 million, and the average revenue generated by a single user (ARPU) increased by more than 17% year-on-year. Previously, the adjustment of epidemic prevention and control measures during the 2023FY period caused a high base. The bank estimates that 1H24FY/2H24FY's revenue side increased 12.7% year on year and 7.8% year on year respectively. The bank believes that the company's revenue side is under pressure in the context of the high base, and it is also expected that 2025FY may usher in improvements.
The narrowing of the fulfillment fee ratio helps achieve endogenous operating profits.
The company's gross profit level is basically stable. The 2024FY adjusted (non-GAAP) net profit scale is 1,438 million yuan (corresponding to non-GAAP net interest rate of 5.3%, versus 2023FY about 2.8%). The gap with apparent net profit is mainly due to fair value changes brought about by equity incentive expenses and transactional financial assets. The bank added back equity incentive expenses (that is, regarded as a normalized activity) and excluded interest income of about 477 million yuan. At the same time, excluding the impact of mergers and acquisitions of the advertising fee business on the reporting side, it was estimated that the endogenous operating profit margin was about 2.2 million yuan. % (vs 2023FY about 0.4%), the company has achieved endogenous operating profit, and the increase in 24FY endogenous operating profit margin may be mainly due to the impact of the bank's narrowing of the performance fee ratio by about 2 pct over the same period last year.
The acquisition of the Group's medical category-related advertising fee business is expected to help improve profit levels.
On November 28, 2023, the company announced that it intends to wholly acquire digital marketing business related to the healthcare category under Ali Mama at a consideration of HK$13.5 billion. Payment methods include issuing shares and cash. On January 17, 2024, the company announced the completion of the acquisition. The bank expects that through the acquisition of the advertising fee business, the company may collaborate with the commission business under the e-commerce platform business to provide medical brands with a more complete service supply to obtain more brand resources, and is also expected to improve profit levels.
Risk: Competition in the industry has intensified, regulations have been tightened beyond expectations, and the downstream medical consumption environment is weaker than expected.