A2 Milk Company Ltd (ASX: A2M) is regarded by many investors as one of the best growth shares on the ASX.
The a2 Milk Company is one of Australia and New Zealand’s largest infant formula producers and the leader in a2-only protein based dairy products. It has operations in New Zealand, Australia, USA and China thanks to key supply and distribution agreements.
What A2 Milk Announced Today
A2 Milk is participating in the Macquarie Australian conference in Sydney today. As part of the presentation the infant formula business gave a trading update.
To begin with A2 Milk outlined its selling point as a premium branded dairy nutritional company and it’s uniquely focused on products containing the A2 beta casein protein type.
In the first half of FY19 it grew revenue by 41% to NZ$613 million and grew profit per share (EPS) by 53% to NZ20.9 cents. It’s still growing at an impressive rate, particularly due to its expansion in China and the US.
A2 Milk Trading Update
In the nine months to 31 March 2019 A2 Milk has created group revenue growth of 42% to NZ$938 million which reflects continued sales growth in nutritional products and liquid milk. The growth continues after a solid first half.
So far in the second half of FY19 the company has accelerated its investments into consumer insights, marketing and organisational capability. It has also made a number of senior and broader team hires with a focus on China and higher capacity for growth.
A2 Milk has also launched ‘a2 Smart Nutrition’ in Australia and China in the fourth quarter of FY19, it’s a fortified nutritional powdered milk drink targeting children aged between 4 to 12 years old.
In Australia its market share for branded fresh milk increased to 11% from 10.8% at December 2018 and its infant formula market share increased to 36.8% from 35.7%.
In China its market share of Kantar Tier 1 cities increased to 6% from 5.4% at December 2018. A2 Milk products are now sold in an additional 1,350 stores Chinese mother and baby stores.
In the US A2 Milk has increased its distribution to around 12,700 stores from 10,000 stores at December 2018.
Is A2 Milk A Buy?
I think A2 Milk is indeed one of the best growth shares on the ASX. Its ability to create a premium product, win enormous market share and take that overseas is very impressive.
What I find exciting is the fact that since June 2018 A2 Milk products is sold in thousands more stores in the US and China. But it’s not as though the maximum sales potential for that store is achieved in the first month. It could take a year or two before someone decides to try a new milk brand. In other words, there is plenty of potential growth to come.
However, no business is a buy at any price. A2 Milk is down 3.5% in early response to the update, but it’s still far too expensive for me to consider buying shares. It would have to be at least 20% lower for me to be decent value for my own portfolio.
A2 Milk isn’t the only top growth share out there, the rapid growth shares in the free report below could also be good ideas.
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