A2 Milk shares fall after Bell Potter downgrade
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More news: Shares in A2 Milk lowered after Bell Potter downgraded its rating on the New Zealand dairy producer after its recent share price rally.
A2 Milk shares were down 1% to $6.36 by 11:55am AEDT, having advanced around 50% since the start of the year.
Bell Potter downgrades A2 Milk to 'sell' after market rally
The news: Bell Potter downgraded its rating on A2 Milk to 'sell' after the New Zealand dairy producer's recent market rally was seen to overvalue its share price.
The numbers: Bell Potter reduced its rating on A2 Milk from 'hold' to 'sell' and cut its 12-month price target from $6.20 to $6.10.
Last month, A2 Milk paused trading after its shares rocketed 8.7% to $6.24, which the company attributed to the new economic stimulus measures in China. A2 Milk shares last closed at $6.42.
Bell Potter analyst Jonathan Snape said A2 Milk's rally sees the company trade at 17.5x its estimated FY25 EBITDA, representing a 115% premium to global infant milk formula plays and a 51% premium to dairy fast-moving consumer goods businesses.
Bell Potter also reduced its NPAT estimates for A2 Milk by 2% in each of FY25, FY26 and FY27.
What they said: Snape said that A2 Milk's trading multiple "does not look to be supported by any fundamental changes" and that he sees better value elsewhere in the sector.
He noted that there are continued soft shipment volumes from Australia to China, while all three of Australia's major retailers have made reductions to their housebrand milk prices.
The source: Bell Potter research
