Analysts cannot seem to agree on a2 Milk (ASX:ATM), a New Zealand-based dairy producer, even amidst its disappointing predictions for FY24 that were unveiled last Monday.
The company anticipates a low single-digit revenue percentage increase in FY24, a stark contrast from the 10.1% revenue growth logged in FY23.
This shift has been mainly driven by the obstacles encountered in China’s infant milk formula (IMF) market.
Analysists from Citi, for instance, have revised their net profit after tax estimates for FY24 and FY25 downwards by 15% and 13%, in light of this lackluster guidance.
Additionally, Citi highlights that the Chinese infant formula market continues to be fraught with challenges, leading to a potential near-term risk escalation.
Moreover, the China label IMF category has been witnessing a downturn since February/March 2023, Citi indicates.
On the contrary, Morningstar projects that a2 Milk (ASX:ATM) will manage to grow its Chinese infant formula market share to approximately 8% by fiscal 2028, up from the current value of around 5%.
This prediction comes even as the brokerage firm makes several reductions to its short-term estimates.
Morningstar expects a2 Milk to continue capturing a larger market share, aided by the increasing premiumisation that is expected to counterbalance the falling birth rates in China to some extent.
Citi has cut its stock price target to NZ$4.74 per share, while maintaining a ‘neutral’ rating.
On the other hand, Morningstar sticks to its fair value estimate of NZ$8.00 per share, though it continues to maintain a ‘high’ uncertainty rating.
As per Refinitiv data, although one in six analysts consider the stock a ‘buy’ or higher, four rate it a ‘hold’ and one considers it a ‘sell’ or lower.
These mixed views place the median price target at NZ$6.10.
This year, as seen at the previous closure, the a2 Milk stock has dropped approximately 36.6%.
a2 Milk (ASX:ATM) is a dairy company based in New Zealand that specializes in producing and selling milk products that lack the A1 beta-casein protein.