On May 28th, the pharmaceutical e-commerce platform, Alibaba Health (00241.HK), saw a significant surge in its stock price after the release of its financial results, with an intraday increase exceeding 15%. As of the time of writing, the stock had risen by 10.10%, trading at 3.38 Hong Kong dollars.

In terms of news, Alibaba Health announced its annual results for the fiscal year ending March 31, 2024. The financial report indicated that during this period, Alibaba Health's revenue was 27.027 billion yuan (RMB, same below), which, due to the high base during the pandemic, only saw a slight year-on-year increase of 1%.

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However, from a profitability perspective, Alibaba Health achieved a substantial increase. During the reporting period, the net profit reached 883 million yuan, a year-on-year increase of 64.6%; the adjusted net profit was approximately 1.438 billion yuan, a year-on-year increase of 90.8%; the gross margin was 21.8%, a slight increase of 0.5 percentage points, primarily due to the group's deep cultivation of refined operations and digital upgrades, leading to optimized operational efficiency and enhanced pricing capabilities.

Alibaba Health stated that the increase in company revenue was mainly due to the continued steady development of its pharmaceutical self-operated business, pharmaceutical e-commerce platform business, and medical health and digital services business during the reporting period. At the same time, the profit saw a significant increase, thanks to the marked improvement in operational quality.

Specifically, as the flagship platform of Alibaba Group's "DoubleH" strategy in the health sector, Alibaba Health integrates three major business segments: pharmaceutical self-operated, pharmaceutical e-commerce platform (Tmall Health Platform), and medical health and digital services, based on "cloud infrastructure," with "cloud pharmacy" as the core and "cloud hospital" as the engine.

Looking at the business segments, Alibaba Health's revenue is highly dependent on its self-operated business, which accounted for 87.84% of the total revenue, reaching 23.739 billion yuan, with a year-on-year increase of 0.6%. The growth in this business revenue is mainly attributed to the continuous enrichment of self-operated B2C retail product categories and SKUs, as well as the continuous optimization of user experience through measures such as enhancing information security and providing more professional consulting services.

As of March 31, 2024, the annual active consumers of Alibaba Health's self-operated business remained stable, with the cumulative number of members growing to 77 million. The average revenue per user (ARPU) saw a year-on-year increase of 17.2%, and the duration of treatment (DOT) for chronic disease users grew by 7.6% year-on-year. This large user base provides Alibaba Health with a stable source of income and growth potential.

During the period, the pharmaceutical e-commerce platform business (Tmall Health Platform) generated revenue of 2.329 billion yuan, accounting for 8.62% of the total, with a year-on-year increase of approximately 4.1%. During the reporting period, the Tmall Health Platform business continued to develop steadily, with the platform's annual active users reaching 300 million and the number of served merchants exceeding 35,000, a year-on-year increase of 28%.

It is also worth mentioning that with the rapid development of internet technology and the continuous changes in consumer demands, the pharmaceutical e-commerce platform has entered the "deep water zone." In the future, building and enhancing digital service capabilities has become a consensus and key in the industry.In recent years, Ali Health has been continuously strengthening its digital capabilities. It is reported that Ali Health's medical and health and digital service business mainly provides users with an integrated online and offline medical and health service system, including traditional Chinese medicine, physical examinations, consultations, registration, vaccines, etc., through terminals such as Taobao, Tmall, Alipay, and Yilu APP.

As of March 31, 2024, Ali Health has signed contracts with more than 220,000 practicing physicians, pharmacists, and nutritionists, an increase of more than 20,000 people year-on-year; the daily average number of consultations has grown to 11,045. During the reporting period, Ali Health's medical and health and digital services achieved a revenue of 958 million yuan, with the proportion increasing to 3.54%, and a year-on-year growth of about 2.6%.

Looking forward to the future market, the latest research report from Bank of America Securities points out that Ali Health's annual performance exceeded expectations, maintaining its "buy" rating, with a target price of 4.5 Hong Kong dollars. It is expected that the fiscal year of 2025 will see a good business momentum, with revenue expected to return to positive growth, profit growth expected to accelerate, and benefiting from the integration of newly acquired high-profit market promotion business.