Yesterday, a2 Milk Co Ltd (ASX: A2M) released its FY26 results.
As Laura Stewart reported yesterday, the company reported preliminary FY26 results, featuring revenue up more than 12% to about $1.97 billion.
This was despite China infant milk formula (IMF) sales declining due to supply chain disruptions.
Key results included:
- FY26 revenue of approximately $1.97 billion, up over 12% year-over-year
- China label IMF sales down around 14% on FY25 after supply chain issues in 4Q26
- EBITDA margin expected at the high end of 14.0% to 14.5% guidance
- NPAT anticipated to be slightly up on FY25, with underlying NPAT also rising
Following the results, A2 Milk shares fell over 4%.
Image source: Getty Images
What is Bell Potter's updated outlook on A2 Milk shares?
Following the results, the team at Bell Potter provided updated guidance on A2 Milk shares.
Bell Potter views the update as broadly positive, with revenue expected to land within guidance at $1.97 billion and EBITDA margins at the top end of the guided range, resulting in EBITDA of around $285 million, broadly in line with expectations.
Profit guidance has improved, with NPAT now expected to be slightly higher year-on-year and operating cash conversion upgraded to around 70%, reflecting stronger cash generation than previously guided.
The key disappointment was the weaker-than-expected performance of China label infant formula, with revenue expected to decline 14% year-on-year and second-half sales falling more than 40% after adjusting for foreign exchange, significantly below Bell Potter's forecasts.
While product supply issues have largely been resolved and management is now focused on marketing initiatives to win back former customers and attract new users, Bell Potter believes the weakness suggests the company may need to rebalance its China sales mix in FY27.
As a result, Bell Potter has modestly increased its FY26 earnings forecast but reduced FY27 and FY28 estimates to reflect higher expected brand investment and a slower recovery in China.
NPAT forecasts have been revised up 3% for FY26, but down 6% for FY27 and down 5% for FY28.
Hold recommendation maintained
A2 Milk shares have experienced volatility in 2026, and are currently down nearly 20% year to date.
Yesterday, A2 Milk shares closed at $7.37 per share.
Bell Potter has maintained its hold recommendation and share price target of $6.90 on the company.
This indicates a 6% downside from current levels.
