Morningstar: Cuts ALI HEALTH (00241) fair value to HK$4, more bullish on JD HEALTH (06618)

Morningstar released a research report downgrading ALI HEALTH's (00241) fair value estimate by 25.9%, from HK$5.4 to HK$4, while also cutting its sales growth forecast for FY2027 to FY2030 to 9%. Although the company maintains a "narrow moat" through network effects and low customer acquisition costs, the firm is more bullish on JD HEALTH (06618) in the healthcare e-commerce space. ALI HEALTH issued a profit warning on Friday, stating that it expects revenue growth for the first half of FY2027 to slow to high single digits from the previously expected 10-15% range. The company attributed this to weak sales of overseas health supplements due to tightened regulations, as well as underperformance in medical device sales. The firm lowered its revenue growth forecast for FY2027 from 15% to 9% and expects net profit to be flat year-over-year, in line with company guidance. Given increased investment in AI capabilities and ongoing marketing campaigns to boost patient engagement, the firm expects operating expenses to rise. ALI HEALTH's revenue growth in the first half of the previous fiscal year slowed to 8% year-over-year; Friday's profit warning has once again raised market concerns about a long-term growth slowdown, as the company noted that growth in medical device sales was temporary, mainly benefiting from government subsidies that have now expired. The company said health supplement sales may return to normal in FY2028, but given that it had previously expected post-pandemic sales growth to recover to 15% annually, Morningstar stated it wants to see sustained sales growth in FY2027 before adjusting its outlook.