"Da Xing" Huizheng raised the target price of ALI HEALTH to 6 yuan, rating "Hold"

HSBC Global Research report indicates that health products are expected to continue being the fastest-growing category for ALI HEALTH (00241.HK), benefiting from its strong platform ecosystem. For pharmaceuticals, although its continued focus on first-party (1P) profitability may limit sales growth, HSBC Research believes that as social insurance claims tighten and offline traffic shifts online, ALI HEALTH will benefit from strong demand for innovative drugs.

Combining strong advertising momentum, HSBC Research has raised its revenue growth forecast for ALI HEALTH for the fiscal year 2026 from a previous annual increase of 9% to an annual increase of 15%. Profit margins have room for improvement due to the shift in revenue structure towards non-pharmaceuticals and the increase in 1P profit margins. HSBC Research continues to believe that net profit growth for the fiscal year 2026 could exceed revenue growth; it has raised its adjusted net profit forecast for the fiscal years 2026 to 2028 by 5% to 8%. After incorporating HSBC Research's latest capital cost and foreign exchange forecasts, its target price has been raised from HKD 4.5 to HKD 6, implying about an 8% downside; it maintains a "Hold" rating, believing that better-than-expected sales momentum for innovative drugs may provide upside potential for revenue and net profit forecasts.

HSBC Research states that ALI HEALTH will announce its results for the first half of the fiscal year 2026 in early November, expecting revenue for the first half of the fiscal year 2026 to be RMB 16.4 billion, a year-on-year increase of 15%, with adjusted net profit of RMB 1.3 billion, a year-on-year increase of 37%, and an adjusted net profit margin of 8.2%