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Infant formula company Jatenergy Ltd just rocketed 14% higher

baby formula shares

The Jatenergy Ltd (ASX: JAT) share price has been on the move again on Wednesday.

At the time of writing the infant formula company’s shares are up 14.5% to 27.5 cents.

Why are its shares rocketing higher?

This morning Jatenergy announced that it has entered into a distribution agreement with China’s Jiangsu Jbingo International Co. Ltd.

According to the announcement, the agreement will see Jbingo distribute all of the company’s products, including its 51%-owned Golden Koala range of milk powders.

The distribution will be through Jbingo distribution platforms in territories in China selected by the company for both online and offline sales.

Management has advised that Jbingo is a major product distributor in China with wide geographical coverage. It sells to leading Chinese B2B maternal and baby platforms such as Hipac, Seatent, Yuouhui, Qianfeng, Mainsweb and DDH, as well as some business-to-consumer platforms such as JD, VIP, Xiaohongshu and Taobao.

Importantly, the distribution agreement is not exclusive and Jatenergy is free to sell products through other distributors.

Should you invest?

Much like Bubs Australia Ltd (ASX: BUB) and Wattle Health Australia Ltd (ASX: WHA), Jatenergy could have enormous growth potential if Chinese consumers take to its infant formula products.

After all, you only need to look at the rise of A2 Milk Company Ltd (ASX: A2M) and Bellamy’s Australia Ltd (ASX: BAL) to see how lucrative that market can be.

However, others have tried and failed before and there’s no guarantee that any of these up and coming infant formula companies will be able to generate meaningful sales in a crowded market.

As I have mentioned previously, I think Bubs’ goats milk offering could have the best chance of succeeding due to differentiating from the competition. Whereas the others lack a unique selling point, in my opinion, that will allow them to stand out and take on a2 Milk and Bellamy’s successfully.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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