Morningstar has revised its fair value estimate for ALI HEALTH (00241) downward by 25.9%, reducing it from HK$5.4 to HK$4, while also trimming its sales growth forecast for the 2027-2030 fiscal years to 9%. Despite the company retaining a "narrow moat" driven by network effects and low customer acquisition costs, the research firm expresses a stronger preference for JD HEALTH (06618) within the medical and healthcare e-commerce sector.

ALI HEALTH issued a profit alert on Friday, indicating that its revenue growth for the first half of fiscal 2027 is expected to slow to high single digits, down from the previously anticipated 10-15% range. The company attributed this slowdown to weak sales of overseas health supplements following tighter regulatory measures, as well as medical equipment sales falling short of expectations. In response, Morningstar has lowered its revenue growth projection for the company in fiscal 2027 from 15% to 9% and anticipates net profit to remain flat year-over-year, aligning with the company's own guidance.

Given the increased investment in AI capabilities and ongoing marketing campaigns aimed at boosting patient engagement, Morningstar expects operating expenses to rise. ALI HEALTH's revenue growth had already decelerated to 8% year-over-year in the first half of the previous fiscal year. Friday's announcement has reignited market concerns about a prolonged growth slowdown, as the company noted that the uptick in medical equipment sales was temporary, largely fueled by government subsidies that have since expired.

The company has suggested that health supplement sales could normalize by fiscal 2028. However, given that it had previously forecast a return to 15% annual growth following the pandemic, Morningstar stated it prefers to wait for sustained sales momentum in fiscal 2027 before adjusting its outlook.