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Why baby formula player Synlait Milk Ltd’s share price has risen 173% in a year

Dairy processing company and infant formula player Synlait Milk Ltd (ASX: SM1) shares were down 1.2% to $10.32 at the time of writing after hitting a 52-week high to cap off May. They’re closing the month off up 3.9% at $10.45.

Synlait today announced it has increased its 2017/18 forecast milk price from $6.50kgMS to $6.65kgMS and $7.00kgMS for the upcoming 2018/19 season.

Synlait CEO John Penno said while the price upgrade was positive, farmers should “remain cautious” because “small changes in market dynamics can have major influence on milk price”.

Synlait shares have rocketed up from just $3.82 at this time last year – a 173% gain.

Synlait has some S&P/ASX 200 stars to look up to in its fight to join the baby formula export success list, with A2 Milk Company Ltd (ASX: A2M) and Bellamy’s Australia Ltd (ASX: BAL) leading the way in the sector.

Synlait’s half-year results showed net profit for the 6 months to January 31, 2018 was $40.7 million – up from just $10.6 million in the previous corresponding period, with net debt reducing from $147 million to $50 million over the same timeframe.

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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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