Shares in the once market darling A2 Milk (ASX:A2M) tumbled by 12% today, shortly after releasing an investor update to the market.

The update mainly focused on China, where A2M said $NZ250 million worth of daigou sales have been lost due to COVID-19 disruptions.

The company also dumped $90 million in unsold nutritional powder stocks back in May, when it became clear the once booming China trade was not getting any better.

In today’s presentation, management has set itself a target of NZ$2bn in revenues over the next five years, without pinning down an exact timeline of when it could be achieved.

As a recent comparison, the company booked revenue of NZ$1.2bn in FY21, and NZ$1.73bn in FY20.

Management also downgraded its margins to the “teens” in the medium term, and in the “low-to-mid 20s” over the longer term.

This compares to the 30% margin level it was consistently delivering pre-Covid.

Investors became optimistic earlier this month when the TGA announced that Chinese jab Sinovac has been labelled as a “recognised” vaccine, raising hopes that daigous might come back to Australian shores sooner than expected.

Daigiou, literally ‘surrogate shopping’ in Mandarin, is where an individual outside of China purchases commodities like infant milk formulas from retailers, and sends them to China at a hefty markup.

Meanwhile, goat milk infant formula company, Bubs Australia (ASX:BUB) surged 40% last week after doubling its Q1 sales to $18.5m in just one year.

The growth was underpinned by infant formula sales in China, including cross-border sales which have rebounded by 156% from the previous year.

Bubs has been embarking on a diversification strategy ever since the daigou channel disappeared, with international markets outside of China now making up a fifth of group revenue.

A2M and Bubs share prices today:

 

Other ASX dairy and milk stocks

Code Company Price %Mth %Yr MktCap
BUB Bubs Aust Ltd 0.505 44 -30 $ 315,579,423.70
AUK Aumake Limited 0.026 30 -70 $ 15,035,032.18
BXN Bioxyne Ltd 0.03 25 100 $ 19,204,361.94
AHF Aust Dairy Group 0.058 16 -25 $ 29,263,804.94
NUC Nuchev Limited 0.74 14 -54 $ 28,805,299.20
SM1 Synlait Milk Ltd 3.44 7 -30 $ 784,708,162.99
A2M The A2 Milk Company 6.07 6 -58 $ 5,093,745,118.10
WNX Wellnex Life Ltd 0.11 5 -78 $ 31,847,110.47
KTD Keytone Dairy 0.125 4 -46 $ 35,632,542.66
CLV Clover Corporation 1.53 4 -12 $ 264,638,504.49
BFC Beston Global Ltd 0.082 3 1 $ 69,967,752.05
HVM Happy Valley 0.092 0 -39 $ 15,608,600.92
JAT Jatcorp Limited 0.015 0 -33 $ 27,266,864.94
HRL Hrlholding 0.115 0 10 $ 56,853,850.19
MBH Maggie Beer Holdings 0.43 0 42 $ 150,995,033.20
FSF Fonterra Share Fund 3.78 -2 -10 $ 407,113,647.71

Aumake International (ASX:AUK)’s outlook along with its share price has been on the rise since the opening of international borders.

The company said tourists back in Australia will drastically change the competitive landscape, and will provide Aumake with a permanent structural opportunity for a rebound.

Around 50,000 Chinese visitors to Australia pre-COVID purchased Aumake brands, generating most of the $60 million of revenues the company made in FY20.

And 80% of tourist related product sales were comprised of owned or new brands, at essentially nil marketing cost to Aumake.

The company’s revenues were hit hard in FY21, with sales plunging from $60m to $12m.

Victorian based Australian Dairy Nutritionals (ASX:AHF) meanwhile, is an aspirant to serve the China market, and is at a later stage of construction for its plant, hoping for first production by this year’s end.

The company already sells some dairy products in Australia under the Camperdown Dairy brand.

As a late entrant, AHF has not yet been exposed to the Chinese market but said a new independent director, Jason Dong, is expected to expand its business relationships in China.

AHF also announced recently that all its farms are now “certified organic”, following a 3-year conversion program commenced in 2018.

 

AUK and AHF share prices today: