Initiating Alibaba Health With HKD 7.20 FVE; Multiple Tailwinds but Long-Term Margins an Issue

We are initiating coverage of narrow-moat Alibaba Health, or AliHealth, with a fair value estimate of HKD 7.20 as the firm should benefit from industry-wide tailwinds--as healthcare e-commerce is one the few niches that should see above-average growth for the retail and consumer defensive sectors in China due to low saturation. We expect a near-term healthy outlook with revenues growing 30% year on year for the next two years, but believe the company could be vulnerable to long-term risk of low operating margins due to increasing competition.