Revenue for fiscal year 21 (end of March 21) increased 62% year over year, lower than our forecast and Bloomberg's forecast of 8% 7%; operating cash flow maintained strong growth (up 67% year over year)

We lowered the company's revenue forecasts for fiscal year 2223 by 15% and 122%, respectively, mainly reflecting lower than expected results for fiscal year 21 and changes in revenue recognition methods for some businesses

We lowered the target price based on classification plus total valuation to HK$22.9 to maintain the purchase rating. We are optimistic about the traffic synergies between the company and Ali Group and the company's leading position in the Internet healthcare industry

Pharmaceutical e-commerce business continues to grow strongly

Proprietary pharmaceutical business revenue increased 62% year over year to 15.518 billion yuan. The growth was mainly driven by rapid growth in annual active users (up 69% year over year to 81 million users) and strong growth in proprietary pharmaceutical business revenue (up 86% year on year). E-commerce platform business revenue increased 67% year-on-year to 1,965 million yuan, mainly due to the strong growth of GMV (48% year-on-year increase to 123 billion yuan) and the continuous increase in the number of annual active users (90 million to 280 million users increased during the period). The healthcare business grew rapidly in FY21, up 166% year on year according to the GMV scale, but due to the influence of the shift of some businesses from self-operated platforms and platform commission revenue confirmed on a net basis, revenue growth slowed (12% year-on-year). We maintained our forecast for the company's overall GMV growth (12% year-on-year increase). A compound annual growth rate of 43% was achieved in fiscal year 21-25, and the GMV will reach 515 billion yuan in fiscal year 25), mainly based on: 1) supervision continues to promote Internet medical policies and prescription outflow policies to mitigate the problem of unequal distribution of medical resources; 2) the COVID-19 pandemic has accelerated the acceptance of Internet healthcare; and 3) relied on Ali Group's traffic advantage to continue to increase the number of annual active users.

Yilu App and Alipay Healthcare jointly build ecological collaboration

The company continues to build an innovative medical ecosystem map based on the two major platforms of the Yilu App and Alipay Healthcare Channel. These platforms can serve all users in Alibaba's channel and can provide a variety of 020 medical services, including: vaccines, body plugs, nucleic acid testing, and home care. The number of monthly active users of the Yilu App has now reached more than 1 million, and has covered more than 46,000 contracted doctors, of which the average number of online consultations has exceeded 180,000 per day. Furthermore, the company will continue to explore the promising health management market through its chronic illness benefit plan, and we believe the company's infatuation efforts will continue to inject momentum into its long-term growth.

Maintain the buy rating and adjust the target price to HK$22.9 We lowered our target price based on classification plus total valuation from HK$25.2 to HK$22.9 to reflect our forecast adjustments. We have changed the valuation method of the e-commerce business from the relative valuation of comparable companies (30 times EVIEBITDA) to the discounted valuation of cash flow to reflect the continuous improvement in operating cash flow due to the expansion of the e-commerce business as the scale of the e-commerce business expanded (compound annual growth of 60% between fiscal years 19 and 21)