Bellamy’s Australia Ltd delivers bumper profit growth

The Bellamy’s Australia Ltd (ASX: BAL) share price will be one to watch on Thursday following the release of the infant formula company’s half-year results last night.

Here are key takeaways from the release:

  • Half-year revenue came in 47.8% higher than the prior corresponding period at $174.9 million ($170 million excluding Camperdown).
  • Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 235.5% to $34.9 million ($36.3 million excluding Camperdown).
  • Statutory net profit after tax of $22.4 million ($25.2 million excluding Camperdown).
  • Diluted earnings per share of 20.4 cents.
  • Outlook: Previous guidance reaffirmed – Revenue growth of 30-35% and EBITDA margin of 20-23%.

I thought this was an impressive half for Bellamy’s and completes a remarkable turnaround for the infant formula company.

During the half the company experienced strong sales momentum across all channels, including infant formula, food, Australia, China, and South East Asia.

This has led to improvements in its market share. According to its presentation, Bellamy’s now has a 14% share of infant formula scan sales in Australia and a 6.1% share of cross-border infant formula sales on the Alibaba platform. Six months ago this was 10.2% and 5.3%, respectively.

An increased marketing spend may have helped here. Bellamy’s spent heavily on marketing its products to Chinese consumers via influencers and to daigou sellers through events and its gift store launch.

But despite this increase, the strong revenue growth and excellent work with cost controls means that EBITDA margins widened from 16.1% to 21.4%.

Did Bellamy’s exceed expectations?

Yes it did. As I discussed earlier this week, Goldman Sachs expected Bellamy’s to deliver sales of $171 million and earnings before interest and tax (EBIT) of $34 million during the first-half, whereas Bellamy’s achieved sales of $174.9 million and EBIT of $37.2 million.

Normally I would expect this to result in a big share price gain today, but I’m not convinced there will be one.

Bellamy’s shares rocketed higher yesterday following the A2 Milk Company Ltd (ASX: A2M). I suspect investors were betting on a strong result today and perhaps even a lift to its full-year guidance.

But whilst it has beaten expectations, it hasn’t made any changes to its full-year guidance. Which could be a disappointment for some investors.

But if this does lead to a drop in the Bellamy’s share price today, it could arguably be a good opportunity to snap up shares.

I think Bellamy's could be a great buy and hold investment option, just like these up and coming star stocks.

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