A2 Milk Company Ltd (ASX: A2M) shares will be in focus next week when the infant formula company releases its full-year results.
Ahead of the release on Monday 22 August, let's see what the market is expecting from the company.
A2 Milk FY 2023 results preview
Expectations are high for A2 Milk in FY 2023 with analysts predicting strong sales and profit growth over the prior corresponding period.
For example, Bell Potter is expecting sales to come in at NZ$1,587.3 million this year. This represents an increase of 9.75% year on year.
As for earnings, the broker is forecasting earnings before interest, tax, depreciation, and amortisation (EBITDA) of NZ$215.4 million and adjusted net profit after tax of NZ$147.5 million. This will mean an increase of 9.8% and 20.3%, respectively, over what it reported in FY 2022.
As you might have noticed above, Bell Potter is expecting A2 Milk's net profit after tax to grow at a much quicker rate than its EBITDA. What's happening here?
Well, this is largely due to A2 Milk's sizeable cash balance. It expects this to underpin positive interest expense of NZ$23.1 million for the year thanks to higher interest rates.
Are A2 Milk shares good value?
Despite its expectation for strong growth in FY 2023, Bell Potter is sticking with its hold rating and $5.70 price target right now.
The broker notes that it has been hard to gauge how the company is performing recently. As a result, it feels the uncertainty makes A2 Milk a reasonably risky proposition at this point. It explains:
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.
