The Blackmores Limited [ASX:BKL] share price has gained 17% in just eight days, and has risen by a staggering 3.97% in early afternoon trading on Thursday.
Blackmores, self-advertised as ‘Australia’s most trusted brand for vitamin, mineral & nutritional supplements’, has enjoyed a firm hold in the Australian health market since naturopath Maurice Blackmore founded it in the 1930s.
China has been the most important overseas market for the supplements giant. Yet despite a dip in Chinese sales in the third quarter, analysts are retaining high hope for the fourth quarter, and as a result, the share price is continuing to enjoy solid support.
Why is the share price rising?
Counterfeit issues and supply problems may have caused slight loss of faith in the brand, but China still loves our beauty products above all others.
Monash University and marketing company Digital Crew recently teamed together to create their 2018 ABC (Australian Brands in China) report.
The investigation found that although health and baby products were suffering, arguably due to supply problems and limited availability of stock, beauty products were highly ranked.
Although Blackmores could potentially be described as more of a health brand than a beauty business, the links between internal health and beauty have seemingly strengthened over time in the new wellness-focused market of 2018.
A shareholder briefing last week that described China as the most important market could have also contributed to the bounce in shares.
The Chinese business is worth $250 million, with strong growth expected.
What’s next for Blackmores?
The shares were recently noted to be trading on forward price-earnings (PE) of 35x, which is nearly triple the amount of the Household & Personal Products industry median PE of 14.95x.
The excitement is still very much based on hearsay. If health brands continue to fall in rank for our Chinese markets, with supply and stock issues recurring on the back of trade tensions, Blackmores could potentially suffer.
3Q18 results weren’t great, and analysts are keeping high hopes for the next quarter.
Only time will tell, but the future looks promising.
Editor, Money Morning
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