Solid 1Q25 unaudited results; Firmly executing 2025 investments
　　+25% YoY topline and historical high of 10.6% adj. NPM in 1Q25 demonstrated Co.’s solidified core capabilities. We deem Co. will firmly execute its 2025 investment schemes and ramp up investments in multiple areas from 2Q25 onwards, esp 1P on-demand retail infrastructures built-up, branding initiatives and AI for enhanced user mindshare and expanded service coverages. Thus, we maintain our FY2025E RMB2.7bn adj. operating profit forecast despite 2% higher revenue estimates. Maintain BUY and uplift our DCF TP to HK$47.0.
　　Key Factors for Rating
　　Solid core competencies with dedicated 2025 investment schemes. We deem Co. solidifies its leading positions in terms of supply chain capabilities, industry value chain partnerships, AI adoptions, etc. amid out-of-hospital and favourable policies tailwinds. We also expect Co. will firmly execute its 2025 investment schemes and ramp up its proactive investments from 2Q25 onwards in multiple fields, especially 1P on-demand retail infrastructures built-up, branding initiatives and AI to further expand service coverages and enhance user mindshare. Thus, we raise our FY2025-27 total revenue forecasts by 2-3% primarily driven by 3% increase of core products sales estimates, to mainly reflect increased AAC and purchase frequency assumptions due to Covid/flu resurgences and potential large traffic from JD Group. We maintain our FY2025- 27E core adj. operating profit largely unchanged with increased GPM forecasts offsetting by raised opex assumptions especially fulfillment and S&M expenses. Our higher bottom line estimates mainly reflect our latest non-operating items, effective tax rate and non-GAAP items forecasts.
　　Outperformed 1Q25 unaudited results with record high Non-IFRS NPM. Total revenue grew robustly by 25% YoY, with pharmaceutical/health supplement/medical device segments logging 30%+/20%/high single-digit YoY, respectively. Non-IFRS OPM expanded by 2.2ppts YoY to 7.9%, primarily driven by 1.6ppts YoY GPM expansion. Non-IFRS net profit grew 48% YoY to RMB1.8bn with adj. NPM reaching historical high at 10.6%.
　　Key Risks for Rating
　　Downside risks: i) regulations; ii) Covid-normalisation; iii) destructive investments; iv) less support from JD Group; and v) fierce competition.
　　Valuation
　　Maintain BUY and lift our DCF TP to HK$47.0 with unchanged 9.5% WACC and 4% terminal growth assumptions. This implies 30x/ 28x/ 25x 2025E/ 2026E/ 2027E Non-IFRS PER.