A2 Milk Company Ltd (ASX: A2M) shares are having a tough time on Thursday.
In afternoon trade, the infant formula company's shares are down 3% to $5.06.
This latest decline means that the A2 Milk share price is now over 25% since the start of the year.
Are A2 Milk shares good value?
According to a note out of Bell Potter, its analysts think investors should be keeping their powder dry for the time being.
The note reveals that its analysts have retained their hold rating with a trimmed price target of $5.70.
However, it is worth noting that this does imply a potential upside of almost 13%, which isn't bad for a hold rating.
What did the broker say?
Bell Potter notes that the data it tracks isn't looking overly favourable for A2 Milk.
It highlights that exports "from Australia (to China and HK) continue to remain subdued, down -44% YOY through 4Q22 and compares to inbound shipments from NZ (where the three leading brands are manufactured) down -32% YOY."
The broker also notes that "total landed IMF volumes in China fell -9% YOY in 4Q22, though this follows a period of material inventory accumulation (volumes up +38% YOY in 3Q23) ahead of new GB standards."
And while commodity-based costs have been falling, the broker suspects that any benefit from this will not be realised until the second quarter of FY 2024.
The broker summarises:
With the inventory build and unwind in China around new GB standards and change in how platforms are doing business, reading individual patterns in the data variables for A2M is incredibly complex in 2H23-1H24e. On face value HK trends looked to have improved in 4Q23 (from historically low levels) while China data is reflective of upcoming label transitions. We would expect FY24e revenue growth to be 2H biased.
