CCB International cut Ali Health's (00241) revenue forecast for 2024 by 16.4%.
The Zhitong Finance App learned that CCB International released a research report stating that the target price of Ali Health (00241) was lowered by 33% from HK$6.3 to HK$4.2, and the revenue forecast for 2024 was lowered by 16.4%, but considering the profit contribution and higher interest income from the acquisition of Ali Mama, the adjusted net profit forecast was raised by 96.8% to maintain the “outperform the market” rating.
According to the report, Alibaba Health's sales declined from a high base, but net profit increased due to increased interest income and lower contract performance costs. Despite an increase in the number of people infected with COVID-19 across China from April to June last year, Ali Health did not see a sharp rise in demand for medical products related to the pandemic, which exacerbated the increase in inventories. As a result, CCB predicts that Alibaba Health's direct pharmaceutical sales business in 2024 will decrease by 8.2% per year to RMB 21.7 billion (same below), and sales will increase by 13.7% per year (excluding medical products related to the pandemic).
The bank said that Ali Health acquired Ali Mama from its parent company in January of this year and will target its exclusive marketing rights. CCB expects that the acquisition will increase Alibaba Health's sales and net profit by 10-15 billion yuan in 2024, while increasing net profit margins. Given the lower cost of implementation, higher interest income, and the high net profit contribution from the company's acquisition of Ali Mama, CCB predicts a year-on-year increase of 68.7% to 1.3 billion yuan in 2024.