@asb83
The major channel for growth for the company is practically non-existent and it's anyone's guess how/if it will recover."
Even before COVID, the major channels for growth were China label (i.e. MBS stores and domestic China e-commerce) and CBEC (English label) e-commerce. Together, these accounted about half of all revenue in FY20. However, if you looked at the respective FY20 growth rates YoY for MBS, CBEC, and ANZ market segments, it was clear that MBS and CBEC were on track to easily overtake ANZ in importance for growth.
This is obviously much more the case now, following the disruption to daigou over the last 6 months or so, but that is an acceleration of the existing trend in terms of where growth is based.
In the most recent guidance update, there were actually some specifics given too. For instance, it was noted that MBS/China label sales grew 40% YoY in 1H21. By my shaky math, this equates to a $206M contribution towards the overall 1H21 revenue figure of $670M provided in December 2020 - i.e. China label will make up 30% of the company's overall revenue in 1H21.
Given that there has been unprecedented MBS store growth in 1H21 (the distribution network has increased from 19,100 to 27,500 or 44% in six months), I think it is not unrealistic to predict continued strong MBS/China label revenue growth in 2H21. For instance, if 40% growth is maintained, we'd be looking at a $472M contribution to overall FY21 sales from China label. Given the pace of roll-out is higher than the usual trend, sales growth could be higher than this.
I agree that it is harder to unravel the specifics of the other segments, except to say that ANZ/USA liquid milk + ANZ IF + CBEC must collectively be worth about $464M in 1H21 sales (if we subtract MBS sales from the guidance figure of $670M). By contrast, these segments added up to $659M in 1H20, so that is around a 29% decline YoY. That obviously didn't meet my expectations/predictions for these areas that I've posted on here before and is by any metric a disappointing result (albeit not out of the ordinary in a COVID-affected business).
But the question is whether the company's full year FY 21 guidance is achievable, they are predicting to grow the $464M in these areas for 1H21 to at minimum $928M in the full FY21 (taking the lower guidance of $1.4B, subtracting the estimated ~$472M in China label sales).
As it happens, $928M is exactly double $464M, so in other words,
management's worst case scenario actually assumes no improvement whatsoever in the business (outside of MBS/China label) in the 2H21, relative to 1H21.
To me, and given the uncertainty that we've seen, I find that is a reassuring baseline expectation, but I also think it is very conservative. For instance, at a bare minimum, we know that liquid milk in both ANZ and USA is growing strongly.
We know that CBEC for 1H21 was 'below expectation' despite strong 11/11 growth, but IMO I am not assuming no growth at all in this segment. Instead it seems that it dropped off more sharply than it usually does following 11/11, prompting management caution given that this Nov/Dec period was directly informs a half-yearly reporting already under close scrutiny. Achieving just *some* growth in CBEC in 2H21 would push FY21 sales expectation closer to the upper end of guidance, without factoring any recovery in daigou whatsoever.
Lastly, daigou were stronger in 2Q21 than they were in 1Q21, which indicates the correct trajectory, which is again at odds with the management's worst case scenario projection.
All IMO, and with the full acknowledgement that I have been clearly wrong about my previous 1H20 predictions. However, as then, I have simply put my thoughts down and tried to be transparent about my assumptions - take it or leave it.
(20min delay)