The a2 Milk share price just hit an all-time high

The A2 Milk Company Ltd (ASX: A2M) share price has continued its impressive run and pushed higher on Tuesday.

So much so, in morning trade the infant formula and dairy company’s shares stormed to an all-time high of $14.23. This gain stretched its year to date gain to a massive 38%.

Why is the a2 Milk share price at an all-time high?

The a2 Milk share price has been on fire since the release of a very impressive half year result last month.

For the six months ended December 31, the company posted a 41% increase in total revenue to NZ$613.1 million and a sizeable 55.1% lift in net profit after tax to NZ$152.7 million.

This stellar half was driven by the growing demand for its infant formula in the ANZ and China markets. Infant nutrition product sales rose 45.3% on the prior corresponding period to NZ$495.5 million, which means they now contribute almost 81% of total sales.

This sales growth led to the company growing its infant formula consumption market share in China to 5.7% and 35.7% in Australia.

The good news is that management appears confident that its strong growth in China can continue. It has accelerated its marketing investment in the country to further grow brand awareness.

As a result, it expects total sales growth in the second half to be roughly in line with the 41% achieved in the first half. And while its EBITDA margin is expected to slide due to its increased marketing, another bumper profit result is expected.

Can its shares go higher?

Whilst I think that a2 Milk’s shares are trading at about fair value now, one broker still believes they can climb notably higher from here.

A note out of the Macquarie equities desk last month reveals that its analysts have retained their outperform rating and lifted the price target on its shares to a lofty $15.75. This implies potential upside of over 10.5% from the all-time high it made today.

Elsewhere in the industry, Bellamy’s Australia Ltd (ASX: BAL) and Bubs Australia Ltd (ASX: BUB) shares have not been able to follow a2 Milk higher today. Their shares are currently 2% lower and 1% lower, respectively.

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Motley Fool contributor James Mickleboro 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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