BofA Securities: Cuts ALI HEALTH (00241) Target Price by 17.6% to HK$4.2, Reiterates "Buy" Rating

BofA Securities released a research report stating that, in view of reduced platform subsidies and weak performance in non-pharmaceutical business, it has lowered ALI HEALTH (00241)'s FY2027 revenue forecast by 4% to RMB37.4 billion, representing a year-on-year increase of 9%; and lowered its adjusted net profit forecast by 5% to RMB2.1 billion, representing a year-on-year decrease of 10%. It has cut ALI HEALTH's target price by 17.6%, from HK$5.1 to HK$4.2, while reiterating the "Buy" rating. Despite the company's recent change of CEO, the bank expects that medical AI and omnichannel pharmaceutical retail will remain the company's core strategies and will strengthen its long-term competitiveness and growth potential. Based on the downward revision of earnings forecasts and the resulting slowdown in expected free cash flow growth from FY2024 to FY2031 (from 39% to 32%), the bank has lowered ALI HEALTH's target price. Nevertheless, ALI HEALTH remains a key beneficiary of the digitalization of the pharmaceutical retail industry. The bank expects ALI HEALTH's revenue for the first half of FY2027 to be RMB18.1 billion (up 8% year-on-year), and adjusted net profit to be RMB1.16 billion (down 15% year-on-year), mainly affected by investments in medical AI and omnichannel pharmaceutical retail strategies.