The Bubs Australia Ltd (ASX: BUB) share price has more than 20% upside from where it is today.
Bubs is one of the leading Australian infant nutrition businesses with a number of products including goat infant formula, organic grass-fed cow infant formula, organic infant snacks, and vitamins.
Broker's bullish rating for the Bubs share price
Whilst Bubs shares have declined by 27% over the past year, a top broker thinks it can make a good recovery.
Citi has a price target on the business of $0.58, which is currently 23% higher than where it is right now. The broker thinks that the outlook is improving for Bubs and that the business can expand geographically and launch new products.
Bubs' recovery
In the first quarter of FY22, total gross revenue nearly doubled to $18.5 million. This was growth of 96% year on year and 45% quarter on quarter.
Management said that the revenue growth was achieved across its key business segments, overcoming COVID-19 disruptions and a challenging macro environment.
The higher margin Bubs infant formula gross revenue increased 124% year on year and went up 64% quarter on quarter.
Bubs was particularly pleased with the level of growth with its China-facing businesses, total revenue here went up 156% year on year and 98% quarter on quarter. Infant formula daigou sales rose 648% year on year and 265% quarter on quarter. Cross-border e-commerce sales rose 49% year on year and 19% quarter on quarter.
Its global expansion strategy is advancing with established entities in New Zealand, China and the USA.
International revenue, outside of China, experienced growth of 489% year on year and made up 24% of quarterly sales. Export sales of Bubs infant formula to markets outside of China went up 154%.
Bubs is also ramping up its business to business services with Deloraine Dairy Solutions, with the aim of being a specialist dairy solution for co-manufacturing and end to end product development for global customers. It contributed 17% of FY22 first quarter revenue (a 16-fold increase year on year).
Outlook
Investors often take into account the outlook for a business, so the Bubs outlook could influence the Bubs share price.
The company wants to grow in numerous countries and regions outside of Australia and China, including Vietnam, Malaysia, Singapore, USA, Europe, the Middle East and Africa.
The Bubs executive chair Dennis Lin said:
We continue to explore opportunities to stretch the Bubs brand to cater to new market segments, adjacent categories and consumer groups.
In light of that, we are confident that our vision to take Bubs to a global stage is becoming a reality…having recovered the ground lost due to COVID-19 disruption, we expect to be able to sustain continued growth momentum, to the extent our forward approach does not depend on a material improvement in the pandemic setting.
