Bellamy's Australia

About the author:

Author name:

By Belinda Moore

Job title:

Senior Analyst

Date posted:

21 April 2015, 2:54 PM

Sectors Covered:

Agriculture, Food & Beverage, Travel and Chemicals

Bellamy's Australia (BAL) is a Tasmanian-based organic food business, specialising in premium baby food and formula. Importantly, both of these segments are growth categories. All of BAL's products are Australian-made and 100% certified organic.

Consequently, its products attract a premium price which parents are willing to pay. Selling organic products provides BAL with a point of differentiation in a competitive market place. It also means that BAL is the fastest growing baby formula company in Australia with a market share of over 14%.

The brand is well established in Australia and has a growing presence in China, Singapore, Hong Kong, Vietnam, Malaysia and New Zealand. BAL also has a user-friendly online store allowing consumers to purchase products conveniently. 

BAL operates a capital light business model in that it outsources the growing, manufacturing and packaging of its products. A key strength of the company is its deep understanding of the organic goods supply chain.

Expect strong earnings growth

BAL is on a strong earnings trajectory. Since listing in August 2014, the company has issued two profit upgrades within six months. Consumers are increasingly demanding organic food and beverages. As Bellamy's launches new products and expands its distribution network both in Australia and overseas, we believe that BAL is well placed to report strong double digit growth for many years to come.

Investment view

We have a positive view on Bellamy's due to its:

• strong brand name;
• point of differentiation;
• leverage to favourable industry dynamics;
• strong supplier relationships;
• product and packaging innovation;
• growing export business;
• solid earnings growth; and
• strong management team.

Key share price catalysts include further profit upgrades, expansion in new markets or products and corporate activity. The main risks are BAL's lack of ownership of the supply chain, raw material supply and the competitive environment. 

We initiate coverage with an Add recommendation.

More information

Morgans clients can access our detailed research report (and share price target) for Bellamy's Australia (BAL). If you are interested in becoming a client, please contact your nearest Morgans office.

Disclaimer(s): Analyst owns shares.

The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.