Blackmores Limited

BKL Details

9MFY17 impacted by decline in Australian sales and higher operating costs: During 9MFY17, the group sales declined by 6.7% yoy to $496 million, while net profit tumbled by 42.8% yoy to $43 million. However, sales trend is encouraging with moderate increase in Q3FY17 despite fewer trading days than Q2. NZ and Australian sales declined by 26% yoy $264 million during the same period impacted by changing patterns of Chinese buyers. BioCeuticals and global therapeutics contribution stood at $76 million by growing at 53% yoy.

Recently, the company entered into an agreement with Kalbe to take BioCeuticals into Indonesia’s hospital and pharmacy channels. In Indonesia, VDS market is 15% yoy with market size of A$1.2 billion, driven by growing middle class, high spending capacity and increasing health focus. Further, the venture invested $2.6 million and has achieved initial sales of $2.8 million for the first few months in stores. Kalbe Farma is the leader in pharma and nutrition space with an extensive distribution covering 12 major cities across Indonesia. In Vietnam, BKL has signed distribution agreement with the Mesa group in March to launch a range of 13 products in the coming months. Further, Mesa’s distribution with established track record of multinational brands (e.g. Nestle, P&G) coupled with increase in spending expected to aid the growth. However, given the ambiguity around changing patterns of Chinese buyers and impact on company’s financials going forward, we give an “Expensive” recommendation on the stock at the current market price of $ 87.90

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