Goldman Sachs: Gives a "buy" rating to Ali Health (00241) with a target price of HK$4.4.

Goldman Sachs released a research report stating that in the first half of the 2025 fiscal year, ALI HEALTH (00241) had a revenue of 14.3 billion yuan, a year-on-year growth of 10%, slightly lower than expected; while the adjusted net profit was 978 million yuan, with a net profit margin of 6.8%, exceeding forecasts. Goldman Sachs gave ALI HEALTH a "buy" rating with a target price of 4.4 Hong Kong dollars. Moderate growth in product sales The report pointed out that ALI HEALTH's sales growth was relatively moderate, especially the sales of self-owned brand (1P) products, which decreased by 4% year-on-year, while market expectations were for a 6% increase. This was mainly due to the company strategically reducing the sales of certain low-margin prescription drugs earlier in the year and shifting towards non-pharmaceutical categories. In addition, its 3P platform business grew strongly by 67%, demonstrating the company's efforts to expand SKUs and new merchants/products, and benefiting from increased advertising spending by the parent company, which improved ad conversion rates and digital marketing capabilities. Operating profit margin exceeds expectations The report also mentioned that ALI HEALTH's operating profit margin exceeded expectations due to the expansion of its self-owned brand gross margin and effective control of operating expenses. Additionally, its procurement costs remained stable, with the proportion of revenue decreasing but at a slower rate. Furthermore, in the past 12 months, the number of active consumers exceeded 300 million, which was essentially flat compared to the second half of the 2024 fiscal year; the number of serviced merchants increased to over 40,000, a growth of 5,000 compared to the second half of the 2024 fiscal year. The company had previously set a target net profit margin of 5%-5.5% for the 2025 fiscal year, and the performance in the first half of the year was in line with the target, with a non-GAAP profit margin exceeding 6.5%.