Nzx full year results, page-238

Morningstar
A2 Milk's Margin Outlook Disappoints the Market, but Increased Outlays Should Pay Off Long TermInvestment ratingWhile A2 Milk's highest-growth days are behind it, we still expect solid future gains, with market share opportunities in Chinese infant formula, U.S. fresh milk, and global follow-on dairy products supporting our outlook for 15% annual earnings per share growth over the next decade. And with minimal capital investment needs, A2 is set to enjoy stellar returns on invested capital and strong free cash flow. We think the company has carved out a narrow economic moat, owing to its brand intangible assets. However, the future success of the firm relies mostly upon developments in the Chinese infant formula market, where we estimate A2 generates more than 80% of its earnings through both direct sales and Australian third parties. We expect the firm's market share to climb to about 15% over the next 10 years from more than 6% in fiscal 2019 but continued competition and increased marketing needs present near-term risks.