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Thoughts on a2 Milk Ltd (A2M)

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    Thoughts on a2 Milk Ltd (A2M)

    Hi Market Matters Your latest comment on A2M was on 25/3/25 - "A2M experienced a significant re-rating in Feb after delivering a stellar result. Cautiously Bullish. " A2M reached a high of $9 in March from a low of $5.80 in Feb prior to their results. They have also commenced paying a dividend. It's price has been supported around the $8 region but this week has fallen over 11% (so far) on no news I can see. Currently $7.73. Do you know the reason for this price drop and what is your view on A2M going forward? regards Deb

    Answer

    Hi Debbie,

    a2 Milk (A2M) fell ~12% this week after Citi downgraded the stock from a Buy to Neutral, although they didn’t change their $8.20 PT.  The crux of their change was they see A2M facing near-term headwinds due to ongoing supply issues and softening demand in China. The catalyst was a recent profit warning from China Feihe, the country’s largest infant milk formula producer.

    • China Feihe’s anticipated ~8-10% revenue drop signals persistent weakness in Chinas baby formula demand which has raised fears for peers Yili, and indeed A2M.

    Beijing’s pro-birth policies are failing to support the industry putting A2M in the too hard basket for MM at this stage.

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    a2 Milk Ltd (A2M)
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