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Is the Blackmores share price in the buy zone?

Healthy women holding bottle of vitamins and mobile phone in kitchen
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The Blackmores Limited (ASX: BKL) share price has struggled to gain momentum in recent years. After sliding heavily from mid 2018 to early 2019, Blackmores has since failed to regain these share price losses. The company’s Chinese business, in particular, has underperformed, no doubt contributing to its lack lustre share price performance.

In a recent capital raising, Blackmores successfully raised $92 million at a fixed price of $72.50 per share. Around $50 million of these funds will be used to strengthen the company’s balance sheet. The remainder will be used to support Blackmores’ activities in the Asian market as part of its turnaround strategy.

So, is the Blackmores share price in the buy zone right now?

Rising demand for immunity products offset by other challenges

In a May 2020 market update, Blackmores revealed it has seen a significant increase in demand for its immunity products. However, this demand has been offset by weaker demand across other segments of the business. Furthermore, immunity products only constitute a small part of the company’s overall product portfolio.

Blackmores also reported that supply chain constraints have restricted the company’s ability to keep up with demand in some of its product segments. In particular, Blackmores has been experiencing difficulties accessing some of its internationally-sourced materials.

Ramp up of Asian growth strategy

Blackmores also recently provided an update on the company’s plan to further accelerate its Asian expansion strategy, particularly in China.

Blackmores will continue to expand both its organisational capabilities and partnership opportunities within this highly lucrative market. This will include driving innovation with a new ‘Modern Parenting’ product line.

The company will also inject more funds into its rapidly growing South East Asian business, including identifying new health and nutritional demand areas. Furthermore, Blackmores will increase investment in its IT capabilities, as well as its in-store product advisors across Indonesian operations.

India is another market in which Blackmores is ramping up investment. The company is allocating further working capital to initially target three large Indian cities. This will then act as a launching pad for further growth in this potentially huge market for the Aussie supplements manufacturer.

Lastly, Blackmores is looking to improve its digital capabilities throughout the entire Asian region.

Is the Blackmores share price a buy right now?

The Blackmore’s share price is in my buy zone right now. But only just…

I’m encouraged by the progress Blackmores is making with its Asian strategy. I believe India, in particular, offers Blackmores exciting potential for growth.

Having said that, I would want to see further evidence of its success in turning the business around before classifying Blackmores as a definite buy right now.

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Motley Fool contributor Phil Harpur owns shares of Blackmores Limited. The Motley Fool Australia owns shares of and has recommended Blackmores Limited. 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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