Blackmores - Chinese regulatory concerns and high PE stock de-rating

Blackmores share price has fallen over 10% which follows on the weakness from last week (down over 20%). We have made several enquiries to our industry sources and although we can't find anything concrete - anecdotal evidence suggests there is some concern over the regulatory situation in China (it's more about the threat to the Grey market C2C channel – the threat depends on a company’s exposure to this channel), and a general de-rating of high PE stocks. Offsetting this, we expect BKL to post a strong 1HFY16 NPAT of A$44.5m up 140% on pcp (reports on 25th Feb). We find it difficult to quantify impacts on demand any potential change to regulatory environment in China may have on the vitamins and mineral market. Having said that, we expect BKL to post a solid 1HFY16 result and given the share price weakness, its now back into territory where we could see a bounce into the result. (BKL, Hold, Price Target A$150.00)


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Scott Power
Senior Analyst
Morgans

Senior Analyst at Morgans covering healthcare, life science, telecommunications, technology and media. I've spent the last twenty years investing in and researching emerging companies and have developed a wide network of contacts across these...

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