Barclays Equity Research released a report today reiterating their Overweight rating on Herbalife Ltd. (NYSE:HLF), and laying out their bull thesis on the controversial nutritional supplements concern. Analysts Meredith Adler and Sean Kras also raised their price target on Herbalife from $78 to $94 on continued growth worldwide (especially China) and their expectations that the company will commence a significant share buyback program in 2014.

Emerging markets growth likely to boost Herbalife

The analysts also argue that continued emerging market growth likely to boost Herbalife Ltd. (NYSE:HLF)’s revenues and earnings, and eventually translate into a higher price per share. “We are also raising our EPS for FY14 to $6.27 from $5.65 and for FY15 to $7.42 from $5.65. The changes reflect faster revenue growth than our prior forecast in several Herbalife regions: Mexico, Latin America, EMEA and China.”

Herbalife Quarterly and Annual EPS

Nu Skin issues in China unlikely to impact Herbalife

The Barclays report also highlights that Herbalife Ltd. (NYSE:HLF) uses a different business model in China than elsewhere. The Chinese government regulates multi-level marketing much more closely than most countries, which results in lower margins for Herbalife, but carefully adhering to these regulations (as HLF does) also means there is little risk of government intervention. “Key factors we see are that distributors in China: 1) buy product from Herbalife at full retail and get rebates based on volume, but only after providing a government-confirmed proof of sale;2) must report every sale to the government, pay VAT and then get a stamp confirming the sale; and 3) must be licensed by the government as providers of personal services and may not work from home.

Nu Skin Enterprises, Inc. (NYSE:NUS) recent run in with Chinese regulatory authorities is unlikely to spill over to Herbalife Ltd. (NYSE:HLF). Sources in China report that Nu Skin was making unrealistic product claims and has been accused of aggressive tactics in the recruitment of distributors. Adler and Kras also point out that Herbalife was already investigated by the Chinese government after the Avon bribery scandal in 2008. The company was given a clean bill of health by the Chinese authorities at that time, and Herbalife Ltd. (NYSE:HLF)’s China operations have not changed materially since then.