Goldman Sachs has released a research report indicating that Ali Health's (00241) performance for the second half of the fiscal year ending March 2026 was mixed. The firm maintains a "Neutral" rating on the stock and has lowered its 12-month target price from HK$4.8 to HK$4.2. This valuation is based on a 28x average forward price-to-earnings ratio for the fiscal years 2027 to 2028.
The report notes that revenue growth is primarily driven by the pharmaceutical segment, particularly prescription drugs and innovative products. However, intense competition is expected to result in slower growth compared to JD Health (06618). Goldman Sachs projects Ali Health's revenue to grow 13% year-over-year for the fiscal year ending March 2027, while JD Health's revenue growth for 2026 is estimated at 18%.
The investment bank highlights that Ali Health's profit margins are under pressure. This is due to gross margin volatility stemming from its revenue mix, coupled with ongoing incremental investments in medical artificial intelligence and the pharmaceutical ecosystem, including areas like warehousing, cold-chain logistics, and upstream marketing. Furthermore, emerging opportunities such as medical AI applications and innovative data-driven solutions for enterprises remain in early stages, with their financial contributions yet to be substantiated.
In light of slower-than-expected growth in the third-party platform business, gross margin volatility from the revenue mix, and incremental investments in AI and innovative drugs, Goldman Sachs has reduced its revenue forecast for Ali Health for fiscal years 2027 and 2028 by 2%. The firm has also lowered its adjusted net profit forecast for the same period by 18% and introduced initial forecasts for fiscal year 2029.
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