20180518-招商证券_香港_-阿里健康-00241.HK-Undervalued_potential__New_Healthcare__champion_38页_3mb

Summary of Ali Health (241 HK) Report

Core Content

Ali Health has evolved from a data tracking service company into a leading healthcare e-commerce and service platform in China, capitalizing on the "Internet + Healthcare" policy initiatives. The report highlights the company's strong growth potential and its strategic positioning in the healthcare sector.

Main Points

• Company Overview: Ali Health is a healthcare informatics-driven platform that offers integrated healthcare e-commerce and services. It is a subsidiary of Alibaba Group, which provides it with significant support through its ecosystem.
• Growth Potential: The report forecasts a 62% CAGR in revenue from FY19 to FY22, driven by increasing e-commerce penetration, rising contribution from innovative revenue streams, and synergies with online healthcare services.
• Market Leadership: Ali Health holds a c.9% market share in B2C health product e-commerce and c.39% in B2B segments. Its parent's Tmall Medicine Hall is a leader in the online marketplace.
• Valuation: The company currently trades at FY21 EV/Sales of 3.9x, lower than its listed peers at 5.2x. The report initiates with a BUY recommendation and a target price of HK$6.8, representing a 21% upside from the current price.
• SOTP Valuation: The SOTP (Sum of the Parts) valuation method is applied, with the following assumptions:
  • E-commerce: Valued at 30x FY22 EV/EBITDA
  • Advertising & Marketing: Valued at 6x EV/Sales
  • HCIT (Healthcare Informatics Technology): Capitalized at 2/3 of R&D spend and valued at 7x P/B for the assets.
• Investment Thesis: The company is viewed as an undervalued potential "New Healthcare" champion due to its strong position in e-commerce and its expanding role in healthcare informatics.

Key Growth Drivers

• Low E-commerce Penetration in Healthcare: China's healthcare e-commerce GMV was c.RMB100bn in 2017, with a 3% penetration rate, significantly lower than the overall e-commerce penetration of 20%.
• RX Pharma Deregulation: The government's policies are expected to drive RMB147bn of RX pharma outflow by 2020, with online pharmacies capturing 1/3 of prescriptions.
• Government Initiatives: The "Internet + Healthcare" policy is expected to create a RMB13bn market by 2020, with initiatives such as "smart review" and "one-stop" reimbursement.
• Healthcare Informatics: Ali Health is leveraging Big Data, Cloud, and AI technologies to integrate with hospitals and offer advanced clinical support services.
• Strong Ecosystem Support: The company benefits from Alibaba's traffic, logistics, and marketing capabilities, as well as its own technological innovations.

Financial Highlights

Investment Risks

• Regulatory Risks: Changes in healthcare and pharma regulations may affect the company's operations.
• Market Risks: Strong competition from retail pharmacies and challenges in achieving higher e-commerce penetration.
• Competition Risks: Other "New Healthcare" players may pose a threat.
• Corporate Governance Risks: Alibaba Group's dominant ownership (73.51%) and control over user traffic could influence the company's independence.

Conclusion

Ali Health is positioned as a key player in the emerging "New Healthcare" sector, with strong growth prospects in e-commerce and healthcare informatics. The report highlights its potential to replicate its success in pharmacies and build a "Tmall for hospitals" model, supported by its technological capabilities and the Alibaba ecosystem. Despite challenges, the company is viewed as undervalued with a strong investment case.