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Is Synlait Milk Ltd the next ASX share to go gangbusters from the Chinese infant formula market?

Shares in dairy processing company Synlait Milk Ltd (ASX: SM1) are up 1.8% to $8.25 at the time of writing after a solid 12-months of share price rises from just $3.15 at this time last year.

Synlait has recently upped its guidance for FY18 packaged infant formula volumes after delivering strong first-half results with a record NPAT of $40.7 million – up from $10.6 million in the previous corresponding period.

Synlait is Canterbury based, but Chinese minority owned, and its sales of canned infant formula have tripled in the last year with Synlait the exclusive manufacturer for S&P/ASX 200 stock star A2 Milk Company Ltd (ASX: A2M).

Synlait recently purchased land in Pokeno, North Waikato, with plans for a $260 million infant formula manufacturing plant on the 28-hectare space, with renegotiated supply agreements with New Hope Nutritionals and Bright Dairy likely to positively impact sales figures by FY19.

With a strengthening foothold in the booming Chinese infant formula market it is hard not to compare Synlait to market darling in the space Bellamy’s Australia Ltd (ASX: BAL) with smaller up-and-coming Bubs Australia Ltd (ASX: BUB) also notable as a serious future contender and Synlait competitor.

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Motley Fool contributor Carin Pickworth has no position in any of the stocks mentioned. 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 Scott Phillips.

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