Alibaba Health Earnings: Demand Recovery Remains Intact, but Short-Term Macro Weakness Expected

We maintain our fair value estimate for Alibaba Health of HKD 4 per share after it reported first-half fiscal 2025 (ending March) revenue of CNY 14.3 billion, which reflected a 10% year-on-year increase and is in line with our estimate. Most of the growth was driven by its Tmall platform, which saw a 68% increase in revenue and 20% increase in stock-keeping units, year on year. Fiscal second half should see greater sales due to seasonality during winter, but the company sees slightly less demand due to macro weakness. As a result, the company lowered revenue guidance to 10% year on year, from 15%, for fiscal 2025. Despite lower revenue guidance, it reported adjusted net margin of 6.7%, which is higher than its guidance of 5% and expects CNY 2 billion in net profit for fiscal 2025, which is 2%-3% higher than our previous estimate. While Alibaba Health’s lowered revenue guidance was disappointing, we still see its double-digit growth as a gradual step toward greater demand given flat revenue growth in fiscal 2024. Nonetheless, we still have some slight concerns over the long-term growth trajectory given lowered guidance and prior to the firm issuing fiscal 2025 guidance, we had expected revenue growth of 20%.