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:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

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.

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

a panel of formidible business people stand in a group with serious looks on their faces as if in judgement of what's before them.
Broker Notes

3 ASX shares to buy: experts

In new notes, brokers say these ASX stocks are good buys today.

Read more »

Woman in red hat with scarf rejoicing in the city park with leaves falling.
Share Market News

Here's what happened to Wesfarmers shares in April

Wesfarmers had a rather strange April...

Read more »

A man holding a cup of coffee puts his thumb up and smiles with a laptop open.
Broker Notes

Bell Potter is tipping a 40% return from this ASX 200 share

A 40% return could be on the cards for buyers of this share.

Read more »

Frustrated stock trader screaming while looking at mobile phone, symbolising a falling share price.
Share Fallers

Why EQ Resources, Inghams, ResMed, and Skycity shares are tumbling today

These shares are ending the week in the red. But why?

Read more »

Woman checking bottle expiry dates.
Broker Notes

Here's why Morgans just upgraded Woolworths shares

The supermarket giant just received a boost from Morgans.

Read more »

A young woman drinking coffee in a cafe smiles as she checks her phone.
Share Gainers

Why Boss Energy, Coles, Evolution Mining, and Mineral Resources shares are charging higher today

These shares are having a strong finish to the week.

Read more »

two men in business suits sit across from each other at a table with a chess board on it. Both hold their hands to their chins and look down in serious contemplation of their next move.
Mergers & Acquisitions

Which ASX 200 stock is slipping on a sharpened takeover bid?

IMF interest is getting more serious, with investors now reassessing.

Read more »

A cute little kid in a suit pulls a shocked face as he talks on his smartphone.
Share Market News

Why is everyone talking about ANZ, Evolution Mining and Coles shares on Friday?

ANZ, Evolution Mining and Coles shares are turning heads today. But why?

Read more »