Surging sales; a growing market share in the China infant formula market, not to mention strong results in Australia and New Zealand combined to push a2M to a record full-year net profit, but it was not enough to please some investors.
a2 Milk shares jumped to new all-time highs yesterday after the company revealed a very solid set of figures for the December half that showed no sign of any damage from the trade war between the US and China, or growing tensions between Australia and China.
Macquarie takes a closer look at the US fresh milk opportunity, the largest consumer market in the world. A2 Milk is currently building its market share, experiencing a similar development profile to Australia, which the broker finds encouraging.
UBS has surveyed institutional investors and finds the market is bullish on a2 Milk, which signals that earnings upgrades and/or positive news on geographic or category expansion is needed for further outperformance.
In the wake of in-house research into the Chinese infant formula market, the broker is more cautious on market outlook but positive on a2. The company is expected to outperform and gain share given its product is the highest regarded yet under-penetrated, and there is scope for price increases.