Alibaba Health I Rg (241 HK)

Global Markets Comment

Ali Health could become a new hub in the value chain, with closer collaboration with major companies in the field, such as hospitals, pharmaceutical makers, and doctors. We expect the online pharma market to grow from RMB14bn in 2019 to RMB 99bn in 2025E, with TAM of over RMB 1.4trn in 2025E. We believe markets have not fully recognised the growth potential of Ali Health's business model with the stock trading at 10x NTM P/Sales which is around historical average, corresponding to 0.22x 2020E PSG, lower than peers' average of 0.32x.

Performance since inception*

Company Profile

Alibaba Health Information Technology is the health flagship company of Alibaba Group. It focuses on the pharmaceutical and healthcare business. It provides pharmaceutical e-commerce to customers, and has been expanding its internet-based medical platform and exploring digital health through its foundation in technology.

Price History 1 year

Investment Case

We expect a 65% revenue CAGR in FY21-23E for Ali Health with direct pharma sales growth outpacing platform sales. We believe Ali Health could become a new hub in the value chain, with closer collaboration with major companies in the field, such as hospitals, pharmaceutical makers, and doctors. We think the market has not fully appreciated the sustainability of Ali Health’s growth nor recognised the potential evolution of its business model, leaving upside to the share price.

Price History 5 years

Risk in Investment Case

Key downside risks are 1) weaker than expected online pharma growth given slower-than expected prescription flow from hospitals; 2) Declining margins from increased market competition; 3) Rising sales, general & administrative costs stemming from worse-than-expected cost control..

Hong Kong & Singapore Private Clients

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