Bellamy's Australia
About the author:
- Author name:
- By Belinda Moore
- Job title:
- Senior Analyst
- Date posted:
- 09 June 2015, 10:29 AM
- Sectors Covered:
- Agriculture, Food & Beverage, Travel and Chemicals
Bellamy's Australia (BAL) has issued its third profit upgrade this financial year. It continues to benefit from a parent's preference to feed their child organic infant formula and baby food from a strong and trusted brand. We have made +20% upgrades to our forecasts.
Brand strength
BAL is now guiding for a reported NPAT of A$7.6-8.3m, up from its previous guidance of A$7.0m. This equates to a 8.6-18.6% NPAT upgrade. We note that the new guidance range includes one-off IPO costs of A$0.27m and some additional one-off items. Therefore, on an underlying basis, the upgrade is even greater. This upgrade reflects stronger than expected domestic sales. With increased scale benefits, we also believe that BAL's margins have expanded from the 1H15.
Bellamy's continues to win market share, and is the fastest growing baby formula company in Australia. The speed of increase in its market share is an indication of the company's appeal to consumers. Bellamy's Organic is easily recognised on the shelf with its well-designed packaging. Selling organic products provides BAL with a point of differentiation in a competitive market place. Importantly, its products attract a premium price which parents are willing to pay.
We make large upgrades
On the back of upgraded guidance, we have increased our NPAT forecasts by 21.1% (FY15), 26.5% (FY16) and 24.1% (FY17). Our new FY15 underlying NPAT forecast of A$8.5m represents 352% growth on the previous corresponding period.
We believe that BAL is well placed to report strong double digit growth for many years to come as consumers increasingly demand organic food and beverages, it launches new products and expands its distribution network both in Australia and overseas.
Investment view
Bellamy's first year as a listed company has clearly been a great success. BAL remains a high conviction call with an upgraded share price target of A$4.55.
More information
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Disclaimer(s): Analyst owns shares.
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