Vitasoy: A Look at Its Past Growth and Future Potential

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Vitasoy International Holdings Ltd (SEHK: 345) is famous for its flagship Vitasoy branded soya milk. It has seen its share price drop by a staggering 46% from its 52-week high price of HK$47.25 and, at the time of writing, currently trades at HK$26.65.

Has the large fall in Vitasoy’s share price made it a company to consider for your portfolio? To find out let’s look at the firm’s five-year revenue and earnings growth, dividend payout and prospects.

Revenue and Earnings

Vitasoy has seen skyrocketing revenue and earnings growth over the past five years from fiscal year (FY) 2014/15 to 2018/2019.

Revenue increased from HK$5.05 billion (US$651.2 million) to HK$7.53 billion over the five years, indicating a compounded growth rate of 10.5% per year. Similarly, profit growth over the same period grew at a compounded 16.95% rising from HK$372 million to HK$696 million.

Moving to look at the first half FY2019/2020 results, Vitasoy reported revenue of HK$4.68 billion and profit of HK$533 million. That suggests that growth has not slowed down in the first half of the fiscal year.

The strong growth over the past five years tells me that Vitasoy’s products are gaining popularity among customers. Its three main product categories; Soya/Plant Milk, Tofu and Tea are mostly considered staples in the Asian region.

Dividend payout

From FY2014/2015 to FY2018/2019, Vitasoy has shared its increased earnings with shareholders by announcing yearly hikes in its dividend. This has resulted in Vitasoy’s dividend growing a compounded 14.41%  from HK$0.244 per share to HK$0.418 during the above-mentioned period.

Similarly, for FY2019/2020, Vitasoy announced that it is maintaining its interim dividend. This has usually been the case, with management hiking year-end dividends instead of the interim dividend.

Increases in dividends show that management sees the importance of keeping shareholders happy. But it is prudently doing this by keeping the dividend payout ratio between 60-70% of earnings.

Future Prospects

Vitasoy’s prospects seem to be pretty bright in my opinion. This is because the market for plant-based nutrition is gaining traction. This can be seen from the increasing popularity of plant-based meats which have found themselves in demand at numerous outlets now.

This trend seems to be one that will last for years to come as individuals move to consume more plant-based food items which should continue to drive sales higher for Vitasoy.

On the expansion front, Vitasoy is not sitting ideal. It has been expanding into new provinces in Mainland China – which is the biggest revenue contributor currently. Having successfully expanded into new provinces in the past, the company can adopt a similar model going forward.

Apart from China, Vitasoy has also recently started expanding into the Philippines. It is doing this by building brand awareness in the country through events and trials. This seems to be going well for the company as it mentioned that it will commence local production in 2020.

Foolish summary

Vitasoy has shown that its products are gaining popularity among customers from the growing revenue it has reported over the past five years.

This, coupled with clear expansion plans within Mainland China and outside, should result in Vitasoy seeing both top-line and bottom-line growth in the years to come.

On a more short-term note, Vitasoy recently announced a profit warning due to the coronavirus pandemic that has been affecting businesses globally. This should hopefully subside, and things should return to normal over the longer term.