The Bellamy's Australia Ltd (ASX: BAL) share price made an unwanted milestone on Monday when it fell almost 5% to a 52-week low of $6.70.
This decline meant the infant formula and baby food company's shares had lost almost 71% of their value since peaking at $23.07 in March.
Why is the Bellamy's Australia share price at a 52-week low?
The main reason for its sharp share price decline this year is the delay to its State Administration for Market Regulation (SAMR) application.
SAMR accreditation is required for the company to sell its Chinese-labelled products in the massive China market. While it can still sell Australian-label products via the daigou and cross-border e-commerce channels, sales growth in these channels has been slowing.
In light of this, I believe the key driver of its future growth will be getting its products on the shelves of mother and baby stores in mainland China.
What now?
Until its SAMR accreditation is granted I expect Bellamy's shares to remain under pressure, especially given its weak outlook for the full year.
Management recently advised that it expects its Australian label sales to be at the low end of its 0% to 10% annual growth range.
As a comparison, last month rival A2 Milk Company Ltd (ASX: A2M) revealed that during the first four months of FY 2019 it achieved a 40.5% increase in revenue to NZ$368.4 million and a 64.5% lift in net profit after tax to NZ$86 million.
Based on these figures, I suspect most investors looking for exposure to infant formula would be buying a2 Milk Company's shares right now.
Should you buy Bellamy's shares?
Although 2018 has been very disappointing, at just 18x earnings I think its shares are looking very attractive for investors that are willing to be patient and ride out the volatility.
Especially with management confident that it will deliver sales of at least $500 million by FY 2021.
This will be a big lift on FY 2018's sales of approximately $329 million and is likely to lead to stellar earnings growth and the rerating of its shares if it delivers on its targets.
