The a2 Milk Company Ltd share price is milking Bellamy’s profit upgrade

Shares in a2-only-protein infant formula and supermarket milk business the a2 Milk Company Ltd (Australia) (ASX: A2M) surged 6.5% today after rival organic baby formula business Bellamy’s Australia Ltd (ASX: BAL) released a profit growth upgrade to the market late last night.

As a result Bellamy’s shares surged 25% to $13.70 today in a return to prices last seen in 2016 just before the Tasmania-based business released a triple profit downgrade soon after substantial share selling by some of its former senior management.

Bellamy’s now expects revenue growth of 30%-35% in fiscal 2018 thanks to rising sales in China, with EBITDA margins also revised higher to 20% to 23%.

The a2 Milk Company has a less volatile track record than Bellamy’s and its sales growth has been even more spectacular largely thanks to rising demand from China and across Australia.

For the 4 months to October 2018 a2 Milk grew net profit 138% and is expecting strong full year profit growth. It will hand in its half-year results next month.

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Motley Fool contributor Tom Richardson owns shares of A2 Milk. The Motley Fool Australia owns shares of A2 Milk. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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