A2 Milk Company Ltd (ASX: A2M) shares are ending the week strongly.
In morning trade, the infant formula company's shares are up over 6% to $7.12.
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Why are A2 Milk shares rising?
Investors have been bidding A2 Milk shares higher today after the company released an update on its quest for regulatory approval in China.
According to the release, its dairy processor partner, Synlait Milk Ltd (ASX: SM1), has announced that China's Ministry for Primary Industries will commence an audit of Dunsandel facility on behalf of China's State Administration for Market Regulation (SAMR) next week.
If everything goes to plan, A2 Milk's China label infant milk formula products will soon be given the thumbs up in relation to the new national standards registration process. This would ensure that the company's supply of China label products continues.
Should you invest before its results?
Investing before the release of a result can be a risky endeavour. As we have seen plenty of times this month, a poor result can send a share sinking lower. Conversely, a strong result can lead to a share hurtling higher.
And with A2 Milk shares trading within a fraction of their 52-week high and ahead of most broker valuations, it would seem that the risk is to the downside ahead of Monday's results.
Though, it is worth noting that UBS has a price target well-ahead of the consensus at NZ$9.75 (A$8.87). This suggests that its shares could still rise 25% from current levels.
UBS believes that the company could more than double its FY 2022 net profit after tax by FY 2025 thanks to strong infant formula sales. It also highlights that China's border reopening has led to share gains in the key market for A2 Milk and believes that there is currently no significant recovery priced into its shares.
Time will tell if the broker has made the right call.
