ATM - A2 Milk Corporation Limited

[Arbroath]

Observation : Sounds like daigou channel is back and sales are doing much better than expected but sales in China is down. Given that English label sales were 35% more than China label in 2021, does that mean that sales & margins are overall up?

Thats my read of it all. Very comprehensive and interesting update. Clearly there are a lot of variables they are dealing with.
I think the market will be a bit disappointed short-term and we might revisit $6.00-6.50 but medium term it feels like they are building a better business with greater insight into the variables. Essentially in transition from ride the daigou tiger to a more mature brand business. Probably be another 12 months before some clarity starts to emerge.

[bull....]

The crucial data & color of how things are really going investors are looking for will have to wait for the Q&A at the 11 am presentation.

Meanwhile, what do these statements really mean :

" ..... there was no material change to its position since that announcement, however it was seeing a different mix of business, favouring its English label infant formula over its Chinese label product.

Sales of English label product in the first quarter of this financial year were lower than the same period last year, but “significantly up” on the fourth quarter, when sales were constrained to reduce inventory that had built up.

While sales of English label product were expected to be down in the first half compared with the same period last year, they were expected to be ahead of expectations.

In contrast, sales of China label product in the first quarter were lower than expected, and expected to be “significantly down” in the first half.'

Observation : Sounds like daigou channel is back and sales are doing much better than expected but sales in China is down. Given that English label sales were 35% more than China label in 2021, does that mean that sales & margins are overall up?

margins will be lower again going forward

[Beagle]

No matter how you slice and dice it the macro picture looks very challenging to me and there is already a lot of expected growth baked into ATM with the company trading on 42 times FY22 earnings and 30.5 times expected FY23 earnings. These sort of metrics used to be reserved for very fast growing companies. Is ATM still a high growth company ?
https://www.marketscreener.com/quote...22/financials/

Under my new mandate make the most of every day I am not going to wade through more than 150 pages but will simply observe the macro picture. I no longer believe this is a fast growing company that warrants the metrics this is trading on. From a TA perspective the long term downtrend is still intact. This is so far from where I see fair value its not worth my time digging further.

[see weed]

35% up on what. Does that mean English label is up a couple of million dollars and the daigou channel still down a couple of hundred mills from last year?

[Beagle]

https://www.nzherald.co.nz/business/...KKHIXADW7JF6Q/

Targeting $2b sales in 5 years but oh my goodness that's less than 11% per annum average top line growth over the next five years, assuming they can even meet that target, (remind me again, how "good" are ATM executives at forecasting lol) - even if achieved that's slow growth in anyone's language.

But wait there's more - Targeting margins "in the teens" in the mid term but consensus average analyst expectations are for margins over 19% by FY24 and sales over $1.7b that year. Margins used to be 30%

I think its clear this is a downgrade and this slow growing company is a far cry from the rate of growth and margins it used to trade on years ago and the PE was just on 30 when it was growing much faster back then but on yesterday's price the FY22 forward PE is a whopping 42 !
I think a fair PE for how this company is trying to slowly grow in the years ahead is no more than 20 which suggests on FY22 average broker forecasted eps of 17 cps this company is worth a fair value of about $3.40.
Oh dear, run for the hills

[Balance]

https://www.nzherald.co.nz/business/...KKHIXADW7JF6Q/

Targeting $2b sales in 5 years but oh my goodness that's less than 11% per annum average top line growth over the next five years, assuming they can even meet that target, (remind me again, how "good" are ATM executives at forecasting lol) - even if achieved that's slow growth in anyone's language.

But wait there's more - Targeting margins "in the teens" in the mid term but consensus average analyst expectations are for margins over 19% by FY24 and sales over $1.7b that year. Margins used to be 30%

I think its clear this is a downgrade and this slow growing company is a far cry from the rate of growth and margins it used to trade on years ago and the PE was just on 30 when it was growing much faster back then but on yesterday's price the FY22 forward PE is a whopping 42 !
I think a fair PE for how this company is trying to slowly grow in the years ahead is no more than 20 which suggests on FY22 average broker forecasted eps of 17 cps this company is worth a fair value of about $3.40.
Oh dear, run for the hills

Grim, isn't it?

[Muse]

https://www.nzherald.co.nz/business/...KKHIXADW7JF6Q/

Targeting $2b sales in 5 years but oh my goodness that's less than 11% per annum average top line growth over the next five years, assuming they can even meet that target, (remind me again, how "good" are ATM executives at forecasting lol) - even if achieved that's slow growth in anyone's language.

But wait there's more - Targeting margins "in the teens" in the mid term but consensus average analyst expectations are for margins over 19% by FY24 and sales over $1.7b that year. Margins used to be 30%

I think its clear this is a downgrade and this slow growing company is a far cry from the rate of growth and margins it used to trade on years ago and the PE was just on 30 when it was growing much faster back then but on yesterday's price the FY22 forward PE is a whopping 42 !
I think a fair PE for how this company is trying to slowly grow in the years ahead is no more than 20 which suggests on FY22 average broker forecasted eps of 17 cps this company is worth a fair value of about $3.40.
Oh dear, run for the hills

I think you got it right on, beagle. RUUUUNNN!

[Beagle]

Grim, isn't it?

Very grim ! Its a SELL

I think its crystal clear the market situation has dramatically changed and that change is permanent. First mover advantage with the marketing and pricing power than confers is long gone and never to return.
Should really be trading on very similar metrics to the slow growing Danone...FY22 PE 17.8 https://www.marketscreener.com/quote...34/financials/

[dobby41]

Oh dear, run for the hills

An run they are - 9% down so far.

[Maxtrade]

An run they are - 9% down so far.

Will we see previous lows tested SP $5.4 NZD, or maybe with this news on top of class actions push past to new lows? Shorts probably entered this morning with this negative update.