Initial condition in the state-space block corresponds to the initial condition of the states x and not the initial condition of the output y.
In your case, the C matrix which relates states and output has a scaling factor. The desired initial output along with the state-space equation could be used to compute the initial condition of the states. But this is not straightforward.
Alternatively, State-Space with Initial Outputs block allows you to specify initial outputs directly. This block can be found under Simulink Extras > Additional Linear.
