The A2 Milk Company Ltd (ASX: A2M) share price is having a year to forget.
Since the start of 2021, the embattled infant formula company's shares are down a disappointing 52%.
Is the A2 Milk share price weakness a buying opportunity?
According to a note out of Bell Potter, its analysts remain positive on the A2 Milk share price.
This morning the broker retained its buy rating and $7.70 price target on the company's shares.
Based on the current A2 Milk share price of $5.61, this implies potential upside of 37% over the next 12 months.
What did the broker say?
Bell Potter has been looking at industry and export data and remains positive.
The broker highlights that Australia-China exports, which are a daigou proxy, were up 8% in October. And while it notes that Christchurch exports to China were down 33% year on year in October, they remain up 10% year to date over the same period last year.
Commenting on the latter, its analysts said: "Based on the four month lead time in shipments to revenues, early indicators of 2H22e would imply activity ~7% higher than 1H22 levels."
Finally, Bell Potter notes that overall China infant formula imports continue to demonstrate double digit year on year declines, with volumes falling 21% year on year in September. However, it feels that volumes may have formed a bottom, and is encouraged by a noticeable spike in export to Hong Kong (CBEC). The broker feels this is "notable and coincides with a similar notable uptick in volumes moving into China from Hong Kong."
Remaining buy-rated
In light of the above, Bell Potter is holding firm with its buy rating on the A2 Milk share price.
The broker concluded: "There is no change to our Buy rating. We see the scope for EPS to double by FY26e, if A2M can execute on the China offline expansion strategy, while recovering 50% of the lost sales (from FY20-21) in English label IMF. Exiting the loss making US assets or navigating a turnaround at the MVM asset would likely accelerate this turnaround. We do not see the current share price as reflecting this potential."
