We maintain our FY23E (end-Mar 23) revenue projection for Ali Health at 20% yoy growth, w/ similar pace in 1H23E and 2H23E
We continue to think the policy adversity and COVID uncertainty are the major pushbacks for the internet healthcare sectors
We maintain SOTP TP at HKD9.8. Maintain BUY on its great traffic synergy w/ Alibaba and leading position in internet healthcare
　　1H23E preview: 20% yoy growth is achievable
　　Co. maintained its revenue guidance of ~20% yoy growth for FY23E. We think this is achievable supported by its leading position and the burgeoning internet healthcare market (we forecast 18% CAGR for overall online healthcare market over 2020-2030E). Meanwhile, we expect Co. to continue to improve its operating efficiency by putting different levers in cost control and continuously achieving traffic synergy with Alibaba. We thus expect Co. is able to narrow the operating loss and achieve breakeven in adj. net profit terms in 2023E.
　　The new policy on online sales had no surprise
　　The State Administration for Market Regulation (SAMR) has recently published the Measures for the Supervision and Administration of Online Drug Sale《药品网络销售监督管理办法》. The final version of the Measure continues the tone from the previous Draft version for Review (送审稿) released last year. The key points of the Measure include to restrict certain prescription (RX) drugs for online sale; to conceal detailed RX drug information from customers without prescription (only shows basic info such as generic names, dosage forms and pricing etc.); and to introduce localized regulatory system on the third party e-commerce platform. We believe the prudent policy is essential to build a healthy and sustainable foundation in the long run.
　　Maintain BUY with SOTP TP unchanged at HKD9.8
　　We maintain SOTP-based TP at HKD9.8. We remain cautious on the regulatory side over the course of next 12mo on the back of a string of tighter rules on online drug sales and online medical consultation during the past year. That said, we believe the policy adversity offers opportunities for industry leaders as higher entry barriers to internet+ healthcare market may deter inferior service providers from entering the market. We believe Co. strengthening platform ability should continue to set it apart from peers in the long run. Key risks: macroeconomic risk, regulatory risk, COVID-19 disruptions, etc.