The A2 Milk Company Ltd (ASX: A2M) share price had a tough time in March.
During the month, the infant formula company's shares lost 12% of their value.
This compares to a 1.1% decline by the benchmark S&P/ASX 200 Index (ASX: XJO).
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Why did the A2 Milk share price underperform?
There were a couple of reasons why A2 Milk shares took a tumble in March.
The first was concerns over trading conditions in the lucrative China market. When A2 Milk released its half-year results in February, it warned that it was entering a challenging period with a falling birth rate and changes to regulations.
A2 Milk's CEO, David Bortolussi, commented:
We are in good shape heading into an increasingly challenging period with the rolling impact of the decline in the birth rate and a market wide transition of China label product to the new GB standard.
Investors appear to believe the second half of FY 2023 could be tricky and may be questioning the company's ability to deliver on its guidance.
What else?
Also potentially weighing on the A2 Milk share price was a broker downgrade from Bell Potter last month.
According to the note, the broker downgraded the company's shares to a hold rating from buy with a reduced price target of $6.80.
Bell Potter explained its decision, commenting:
We downgrade from Buy to Hold. Ultimately A2M and SM1 balance dates don't align and SM1 issues may simply reflect restocking and destocking decisions on the part of A2M around SAMR registration. While we like the long-term story in A2M, we are cognisant that FY24e market expectations are higher than ours and unfortunately we saw more in the recent SM1 1H23 result to support our current forecasts than make us consider materially upgrading them.
