New Zealand Professional Investment Services Firm

Forsyth Barr

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

<ul><li>The a2 Milk Company (ATM) delivered a solid FY23 result in-line with our expectations, showing strong market share gains, particularly in its key China Label (CL) channel.</li><li>While positive, outlook commentary dominated and the key negative surprises were (1) FY24 outlook for "low single digit" revenue growth and broadly flat EBITDA margins, implying EBITDA -11% below consensus, and (2) tempered medium-term EBITDA margin guidance commentary.</li><li>Headline multiples (~21x 12 month forward PE [~19x cash adjusted] and ~13x EV/EBIT) are depressed versus ATM's history but given (1) the lack of near-term catalysts, (2) likely structural valuation de-rate as growth/returns moderate (consumer staples peers with similar growth, returns and margins trade on ~19x PE and ~14x EV/EBIT), and (3) ongoing macro headwinds, we don't yet believe the margin of safety is sufficiently wide to warrant a change in investment view. Retain NEUTRAL.</li></ul>

The a2 Milk Company (ATM) delivered a solid FY23 result in-line with our expectations, showing strong market share gains, particularly in its key China Label (CL) channel.While positive, outlook commentary dominated and the key negative surprises were (1) FY24 outlook for "low single digit" revenue growth and broadly flat EBITDA margins, implying EBITDA -11% below consensus, and (2) tempered medium-term EBITDA margin guidance commentary.Headline multiples (~21x 12 month forward PE [~19x cash adjusted] and ~13x EV/EBIT) are depressed versus ATM's history but given (1) the lack of near-term catalysts, (2) likely structural valuation de-rate as growth/returns moderate (consumer staples peers with similar growth, returns and margins trade on ~19x PE and ~14x EV/EBIT), and (3) ongoing macro headwinds, we don't yet believe the margin of safety is sufficiently wide to warrant a change in investment view. Retain NEUTRAL.

The A2 Milk Company - FY23 Result — Gains and Strains

A2 Milk Co Ltd

The A2 Milk Company - FY23 Result — Gains and Strains