The A2 Milk Company Ltd (ASX: A2M) share price has been on form this year.
Since the start of 2025, the infant formula company's shares are up an impressive 35%.
Does this make them cheap, fair value, or expensive? Let's see what analysts at Bell Potter are saying about the company.
What is the broker saying about A2 Milk?
Bell Potter has been looking at recent industry data and it isn't overly positive for A2 Milk's sales to mainland China. It said:
May'25 shipment data ex-traditional SM1 ports was underwhelming with direct shipment values to China down -52% YOY (down -8% YOY through 2H25TD) and direct shipment values to China + Hong Kong down -54% YOY (and down -15% YOY through 2H25TD).
Historically there is a high correlation between these trade flows and reported revenues for A2M PRC label sales (92% correlation to China direct) and China EL sales (89% correlation to China + HK direct). Looking at typical lags there should be available inventory on hand to achieve YOY growth, however, the three-month trend has been noticeably weaker YOY and the R12M trend has slowed to +7% YOY growth in NZD terms (and +4% YOY in CNY terms).
Another area of concern is data relating to marriage rates in China. It adds:
In recent months we have seen a -8% YOY contraction in 1Q25 China marriage rates., which follows a -21% YOY contraction in CY24. There is a 95% correlation between births and marriages lagged one year over the past ten years.
What about the A2 Milk share price?
According to the note, the broker thinks that the A2 Milk share price is about fair value at current levels.
This morning, the broker has reaffirmed its hold rating and $7.85 price target on the company's shares. This is largely in line with where its shares ended yesterday's session.
And while a 2.2% dividend yield is expected over the next 12 months, this doesn't change much in respect to the total potential return.
Commenting on its hold rating, Bell Potter commented:
Shipment trends from traditional SM1 ports have been noticeably softer for the past three months, with R12M China direct values up +7% YOY (but down -8% from the Feb'25 peak). Our Hold rating is unchanged and predicated on: (1) A2M's premium to global FCMG (11.5x FY26e EBITDA) and Functional FMCG entities (15.1x FY26e EBITDA); (2) An analysis of vertical integration opportunities, which concluded likely negative near term EPS dilution; and (3) Recent peer commentary implying an uplift in new customer recruitment costs.
