Pivoting from infant formula, what’s next for the Jatcorp (ASX:JAT) share price?

Much like the A2 Milk Company (ASX: A2M), the Jatcorp (ASX: JAT) share price reflects its struggle to improve infant formula sales.

| More on:

The Jatcorp Ltd (ASX: JAT) share price was up 11% over lunch today after the company received approval from China to sell its newly developed skincare product.

However, the Jatcorp share price has since lost much of that ground and is up 3.7% trading at 2.8 cents at the time of writing.

Jatcorp share price higher on Chinese approval 

Jatcorp has been busy making a pivot into new lines of business alongside its traditional infant formula segment. This is in response to a new COVID-19 environment that has seen minimal sales through daigou channels and a lack of international tourism.

On Wednesday, the company announced that its first product, Poupin Silky Brighten Revitalising Serum, has been approved by the Chinese Government authority, CFDA, for sale in China through off-line channels, including local department stores and specialty cosmetics stores. Jatcorp also intends on selling its products through major online platforms, including the most popular social media web influencer sales channels. 

In today’s announcement, Jatcorp also notes that its subsidiary, Sunnya Ltd, has successfully opened its Neurio milk powder range to the Singapore market. The sale of products will now occur in Singapore’s local pharmacies and through online platforms in Indonesia, Malaysia and Philippines. 

Falling Chinese sales drive pivot

Jatcorp follows a similar narrative as the A2 Milk Company Ltd (ASX: A2M) with COVID affecting its core infant formula business. 

In the company’s 1H21 results, its revenues slumped from $30.6 million in 1H20 to $13.5 million in 1H21. Its decreased revenue was caused by lockdown measures, closed daigou stores and the paused flow of Chinese students and tourists into Australia. Despite its revenues falling by more than 50%, its loss after tax was relatively stable at $2.5 million compared to the $2 million in 1H20. 

Today’s announcement reiterates the company’s strategic decision to diversify its business and seek new opportunities to increase revenues. Jatcorp managing director Wilton Yao commented on the COVID-19 headwinds saying:

To meet this challenge, and considering the negative effect of tensions between Australia and China, the board has taken necessary actions to manage under the difficult situation.

JAT has moved part of its plant-based meat operation into China, appointed new contract manufacturing in New Zealand and other countries and signed agreements with Chinese state-owned companies and large private enterprises to improve the stability of the business operation.

Meanwhile the board is continuing to seek new business opportunities to increase the operational scale and sales revenues.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Market News