Company Reports

We expect narrow-moat Alibaba Health, or AliHealth, to benefit from low saturation in healthcare e-commerce. The business is still in the early phase, where it is focused on mass user adoption and should see robust growth in the near term, and is now set to integrate the advertising business into its platform to add another incremental revenue stream. It also plans to add cloud-based artificial intelligence to develop the platform into a one-stop shop for healthcare products, services, and a digital hospital for its users.

Alibaba Health preannounced Friday that it expects revenue growth for the first half of fiscal 2027 to slow to the high single digits from the midteens, citing weakness in health products sales due to stricter overseas health product regulations, and worse-than-expected sales in medical devices.

We expect narrow-moat Alibaba Health, or AliHealth, to benefit from low saturation in healthcare e-commerce. The business is still in the early phase, where it is focused on mass user adoption and should see robust growth in the near term, and is now set to integrate the advertising business into its platform to add another incremental revenue stream. It also plans to add cloud-based AI to develop the platform into a one-stop shop for healthcare products, services, and a digital hospital for its users.

Alibaba Health's fiscal 2026 second-half revenue growth slowed to 10% year on year but was in line with our expectations. Sales growth was driven by new drug launches and the addition of new product categories and stock-keeping units, such as GLP-1s.

We expect narrow-moat Alibaba Health, or AliHealth, to benefit from low saturation in healthcare e-commerce. The business is still in the early phase where it is focused on mass user adoption and should see robust growth in the near term, and now is set to integrate the advertising business into its platform to add another incremental revenue stream. It also plans to add cloud-based AI to develop the platform into a one-stop shop for healthcare products, services, and a digital hospital for its users.

Both Alibaba Health and JD Health have lost 10% of their market valuations since news that artificial intelligence poses a threat to software-as-a-service.

Alibaba Health's first-half fiscal 2026 (year ending March) revenue increased 17% year on year, driven by strength in its direct sales platform due to robust sales of prescription drugs and medical devices.

We believe Alibaba Health's sales are finally normalizing, given the read-through positive results from JD Health, which reported a 25% year-on-year increase in first-half 2025 revenue.

We expect narrow-moat Alibaba Health, or AliHealth, to benefit from low saturation in healthcare e-commerce. The business is still in the early phase where it is focused on mass user adoption and should see robust growth in the near term, and now is set to integrate advertising business into its platform to another incremental revenue stream. It also plans to add cloud-based AI to develop the platform into a one-stop shop for healthcare products, services, and digital hospital for its users.

Alibaba Health reported full-year March 2025 results, revealing fiscal second-half 2025 revenue grew 16% year on year while operating margin declined 130 basis points sequentially but increased 150 basis points year on year.

We expect narrow-moat Alibaba Health, or AliHealth, to benefit from low saturation in healthcare e-commerce. The business is still in the early phase where it is focused on mass user adoption and should see robust growth in the near term, and now is set to integrate advertising business into its platform to another incremental revenue stream. It also plans to add cloud-based AI to develop the platform into a one-stop shop for healthcare products, services, and digital hospital for its users.

We expect narrow-moat Alibaba Health, or AliHealth, to benefit from low saturation in healthcare e-commerce. The business is still in the early phase where it is focused on mass user adoption and should see robust growth in the near term, and now is set to integrate advertising business into its platform to another incremental revenue stream. It also plans to add cloud-based AI to develop the platform into a one-stop shop for healthcare products, services, and digital hospital for its users.

We expect narrow-moat Alibaba Health, or AliHealth, to benefit from low saturation in healthcare e-commerce. The business is still in the early phase where it is focused on mass user adoption and should see robust growth in the near term, and now is set to integrate advertising business into its platform to another incremental revenue stream. It also plans to add cloud-based AI to develop the platform into a one-stop shop for healthcare products, services, and digital hospital for its users.

JD Health's second-half 2024 revenue rose 9% year on year to CNY 29.8 billion and met our forecast, but shares fell 12% in the Hong Kong trading session as it guided for lower profitability in 2025 due to greater expected fulfillment and marketing expenses.

On the Hong Kong stock exchange, Alibaba Health and JD Health have pared back their share price losses after their initial 5% drops on the Trump tariff news.

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%.

In the case of a Donald Trump presidency, we do not expect any material impact on Alibaba Health or JD Health even if new tariffs are imposed on China, given that their distribution customers are mostly within China. Based on their 2023 annual reports, JD Health and Alibaba Health have close to 100% and 95% of their respective revenue exposed to China. Both companies also indicated that most of their assets and operations are located within China as well, which reaffirms our belief that neither company will be materially affected by the potential of increased tariffs. We maintain our respective earnings forecasts and fair value estimates of HKD 4 and HKD 45 per share for Alibaba Health and JD Health. For investors who wish to have exposure to Chinese companies with a high market share, we still prefer JD Health and Alibaba Health, given their narrow moats due to their distribution network and capabilities. We recommend entry should there be a knee-jerk pullback reaction to a Trump win and its tariff-related risks.

We retain our fair value estimate for Alibaba Health at HKD 4 per share after it posted fiscal second-half 2024 revenue of CNY 14.1 billion, which was much better, at 13% above our estimate. More importantly, adjusted operating margin of 2.7% was much better than our forecast of negative 10%. Better-than-expected profitability was due to a significant decline in fulfillment expenses from improved operating efficiency. The company also reiterated its revenue guidance of a 15% increase year on year for fiscal year 2025, which was the same outlook from its update three months ago. In addition, it guided for adjusted net margin to expand to 5.0% next fiscal year, which is an improvement from 3.3% in fiscal year 2024. The margin uptick would be driven by further reductions in fulfillment expenses as a percent of sales. The share price responded to the improved profitability forecast by jumping 10%, and we are encouraged that the company is back on track with margin expansion. We forecast the adjusted net margin to reach high single digits on a steady-state basis, given peer expectations from its main competitor, JD Health.

We maintain our fair value estimate for Alibaba Health at HKD 4 per share after it reported fiscal second-half 2024 revenue of CNY 14.1 billion, which was much better, at 13% above our estimate. More importantly, adjusted operating margin of 2.7% was significantly better than our forecast of negative 10%. Better-than-expected profitability was due to a significant decline in fulfillment expenses from improved operating efficiency. The company also reiterated its revenue guidance of a 15% increase year on year for fiscal year 2025, which was the same outlook from its update three months ago. In addition, it guided for adjusted net margin to expand to 5.0% next fiscal year, which is an improvement from 3.3% in fiscal year 2024. The margin uptick would be driven by further reductions in fulfillment expenses as a percent of sales. The share price responded to the improved profitability forecast by jumping 10%, and we are encouraged that the company is back on track with margin expansion. We forecast the adjusted net margin to reach high single digits on a steady-state basis, given peer expectations from its main competitor, JD Health.

We lower our fair value estimate for Alibaba Health to HKD 4.00 per share from HKD 6.70 after the company held a management call and indicated that fiscal 2024 (ending March) revenue is expected to decline 5% year on year. Comparatively, this is worse than peer JD Health’s full-year 2023 revenue performance, which declined 0.3% year on year. In addition, Alibaba Health provided revenue guidance for fiscal 2025 and expects it to only increase 15% year on year. While headwinds were expected in the second half of 2023, given comments made by JD Health due to the reduced consumption of pandemic-related items, the decline was worse than we had anticipated. We also have new concerns over the long-term growth recovery, given that Alibaba Health's revenue guidance in 2025 is below our previous forecast of the mid-20s. The company provided other minor details, including that demand for medical devices and healthcare products remains strong. Alibaba Health also expects an incremental revenue stream coming in from its advertising business in the future.