Media Updates, page-14087

FN Arenas round up of broker moves after the results (yes, brokers are evil etc etc):

https://fnarena.com/index.php/2024/02/21/a2-milking-it/

Valuation

a2 Milk shares were up 34% year to date following the result release, including 12.5% on the day.Macquarie suggest while stock momentum remains and downside catalysts are limited, earnings upgrades from here are also limited.

Macquarie retains Neutral.Bell Potter points out the re-rate has the shares trading at the upper end of Fast-Moving Consumer Goods & Dairy entities on an FY24 enterprise value to earnings basis, which suggests “neither unreasonable nor compelling value”. Bell Potter retains Hold.

Wilsons believes the most significant challenges and uncertainty may well remain ahead for the company, with the need for supply chain transformation and new product development (in addition to ongoing market share gains) to improve the resilience of the business model and achieve medium-term financial targets. This broker now views the risk/reward equation as more balanced and downgrades to Market Weight.The company’s revenue target is reliant on China label innovation that can only occur if or when a2 Milk obtains more China label regulated slots, Citi suggests, a process which is taking longer than expected. Considering these factors, along with the recent strong share price performance, this broker downgrades to Neutral.

Morgans remains attracted to the top five position in the world's largest infant formula market, brand strength, management team and balance sheet. Over the medium term, this broker believes the company is well positioned and should take further market share, and be an even stronger brand in China given the market has been severely rationalised through regulation. However, after strong recent share price appreciation, Morgans downgrades to Hold on valuation.

On the other hand, UBS suggests the first half result should give investors sufficient confidence that better times lay ahead. UBS retains Buy.Despite the re-rating, Ord Minnett believes the stock remains undervalued, suggesting the market is overly pessimistic on the pricing and volume outlook for Chinese formula and under-appreciates the strength of the a2 Milk brand in China.

Ord Minnett retains an Accumulate rating.Among the brokers monitored daily by FNArena there are now two Buy or equivalent and four Hold ratings. The consensus target price has risen to $6.08 from $5.39.

Outside those brokers, Wilsons’ target has risen to $5.85 from $5.47, while Kiwi broker Jarden has increased by 26% to NZ$6.50, and retains an Overweight rating.