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	a2 Milk still a neutral bet as it readies for maiden dividend
1	Rebecca Howard| Mon, 03 Feb 2025
2	a2 Milk CEO David Bortolussi. (Image: A2 Milk).
3	Forsyth Barr analysts don’t expect any major surprises in the first-half result of NZX-listed The a2 Milk Company (ATM), given the latest data from research group Kantar. The data for a2 Milk’s first half highlights low single-digit growth, with a strong gain in market share in the second quarter, mainly from China Label. Growth, however, is slightly below consensus infant formula expectations, said Forsyth Barr analysts Matt Montgomerie and Benjamin Crozier. “However, given data volatility, ATM’s track record of exceeding Kantar's China Label growth, and recent revenue gains in other areas (primarily Mataura Valley Milk and Nutritionals), we don't anticipate material surprises in ATM's 1H25 result,” they said. Solid improvement a2 Milk is due to report its first-half result for the six months to Dec 31 on Feb 17. The company expects todeclare its first interim dividendat the February result at the bottom end of a range of 60% to 80% of normalised net profit. The analysts retained a neutral rating and had a target price of $6.85. The stock closed Friday at $6.44. According to Kantar data, a2 Milk had a market share of 7.4% in the four-week period ended Dec 27, above its six-month average of 7.3% and below its 12-month average of 7.6%. The first-half market share was 7.4%, versus 7.8% in the second half of the prior financial year. The 2Q market share was 7.7%, a solid improvement on 1Q (7.2%). They noted, however, that the data was inherently volatile on a period-by-period basis. 'Limited new products' Overall, the industry was down 2% year-on-year on a three-month rolling basis, marking the lowest three-month rolling decline since April 2022. The market share of brands outside of the top 10 has firmly plateaued after three years of a near-linear decline (from around 33% to around 20%), the data showed. The top five brands have gained the largest amount of this share. It is clear that a2 Milk has benefited from this trend, the analysts said. “We watch this data with interest over the coming months. Sustained market share gains (which consensus assumes) off a higher base with limited new products (for now) becomes more challenging if this trend continues.”