Citi on a2 Milk, Bubs, Nuchev: Daigou channel uncertainty sours outlook

Nuchev

27/04/2021 03:55

** Citi says important takeaway for dairy producers a2 Milk
Co  ATM.NZ  and Bubs Australia  BUB.AX  from Nuchev Ltd's
 NUC.AX  March-quarter result is continued uncertainty
surrounding outlook for daigou channel 
    ** Brokerage says NUC's uncertainty over whether recovery
will ever take place is worrying; a number of Australian and New
Zealand dairy firms rely on informal daigou network to sell
goods to China
    ** NUC expects strong revenue and volume growth in H2 in
cross-border e-commerce (CBEC) channel which will be partially
offset by COVID-19 continuing to disrupt the daigou stream
    ** NUC plans to boost its ranging in Coles  COL.AX  to 761
stores from 266 currently by May 2021, which is likely to eat
into BUB's market share 
    ** BUB has long-term growth prospects but "we need evidence
of a material and sustainable daigou turnaround to turn positive
on the stock" - Citi
    ** Retains "sell" rating on a2 as resurgence of domestic
brands may hit demand for co's products and pricing pressure,
arising from a2 resellers discounting products as inventory
moves closer to expiry


 (Reporting by Anushka Trivedi in Bengaluru)
 ((Anushka.Trivedi@thomsonreuters.com; +918061823241;))