UBS: Raise the target price of ALI HEALTH (00241) to 4.7 Hong Kong dollars and maintain a "sell" rating.

UBS released a research report stating that the relative valuation method of ALI HEALTH (00241) has been changed from market sales ratio to adjusted market earnings ratio. The profit forecast for ALI HEALTH for the fiscal years 2026 to 2028 has been raised by 17% to 21% to reflect stronger first-party platform sales growth. Based on the adjusted market earnings ratio of 23 times for fiscal year 2027, the target price has been raised from HK$3.8 to HK$4.7, but the "sell" rating is maintained. Since the downgrade of ALI HEALTH's rating in May, the company's first-party platform sales (1P) growth has exceeded the bank's expectations. However, it is believed that much of this is a structural shift of drug supply from offline to online, rather than a strategic shift of the company focusing on first-party platform or first-party platform drug sales. It is also believed that leading companies in the same industry can benefit from this structural trend as soon as possible. UBS also pointed out that the gap between ALI HEALTH and main competitor JD HEALTH (06618) is widening, with the latter seeming to have established a competitive advantage in user awareness and drug supply chain, and taking the lead in multi-channel layout. UBS believes that ALI HEALTH's current adjusted market earnings ratios of 32 and 27 times for the next two years may not fully support its forecasted annual compound growth rates of 13% and 19% respectively for revenue and adjusted profit for fiscal years 2025 to 2028.