Moving Towards Increasing Profitability: Down 5.9% on February 22, 2018, Bellamy’s Australia Ltd.’s (ASX: BAL) first-half statutory profit more than tripled, supported by increase in demand of its infant formula and lower operating costs during the period. The company has reported normalised sales growth of 47.8% to $174.9 Mn in 1HFY18 from $118.3 Mn in 1HFY17 on account of higher demand of its product mix in overall market. The company has reported EBITDA at $34.9 Mn, registering strong growth as compared to $ 19 Mn in 1HFY17. Bellamy's marketing spend has been estimated to be about 3.8% of sales and might rise to 5.0% given the developments at all fronts. NPAT came at $22.4 Mn in first half of the year and marked a significant growth on year-on-year basis.

The acquisition of the remaining equity in Camperdown is a further step in restructuring the business and provides a foundation for building strategic manufacturing capability. Further, the company lodged CFDA registration for Chinese label products late last year, which is in review status. Bellamy's raised $60 million at $4.75 a share last June to buy out an onerous take-or-pay contract with Fonterra and to partially fund the Camperdown acquisition. The company remains mindful of the inherent risk of a dynamic and highly regulated market and focuses on obtaining CFDA licence and executing a long-term growth plan.

The management believes that the company’s turnaround plan is continuing to gain traction in the near future, thereby the company has revised full year target growth of revenue in the range of 30-35% from 15-20% and EBITDA margin from 17-20% to 20-23%, driven by a combination of cost optimization strategy and the impact of robust revenue growth. Further, the first-half revenue is expected to be higher than the second half due to higher winter consumption in China and Chinese New Year, the impact of sales from platform events and more Chinese label sales shifting to the first half of 2018 related to delays in its Chinese registration for its branded products.

It was seen that share price has increased in the last six months by 104.9% and we reiterate our “Hold” recommendation on the stock at the current price of $14.90

 
Stabilisation plan in progress (Source: Company Reports)

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