Alibaba Health: Lowering Fair Value by 40% After Preliminary Guidance on Fiscal 2024 Revenue Decline

We lower our fair value estimate for Alibaba Health to HKD 4.00 per share from HKD 6.70 after the company held a management call and indicated that fiscal 2024 (ending March) revenue is expected to decline 5% year on year. Comparatively, this is worse than peer JD Health’s full-year 2023 revenue performance, which declined 0.3% year on year. In addition, Alibaba Health provided revenue guidance for fiscal 2025 and expects it to only increase 15% year on year. While headwinds were expected in the second half of 2023, given comments made by JD Health due to the reduced consumption of pandemic-related items, the decline was worse than we had anticipated. We also have new concerns over the long-term growth recovery, given that Alibaba Health's revenue guidance in 2025 is below our previous forecast of the mid-20s. The company provided other minor details, including that demand for medical devices and healthcare products remains strong. Alibaba Health also expects an incremental revenue stream coming in from its advertising business in the future.