A2M Share Price Rises 4.7% as Chinese Regulation Fears Subside

At time of writing, the share price of The A2 Milk Company Ltd [ASX:A2M] is up 4.71%, trading at $9.79.

This comes as news broke that Chinese regulators would not be placing any additional restrictions on its trade in the country.

The A2 Milk Company markets its A2 brand in New Zealand, Australia and the United Kingdom. Of particular interest is its baby formula, which now has a 5.6% market share in China.

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China reprieve helps A2M Share Price

The Chinese Government’s State Council issued a decision that kept its cross border e-commerce (CBEC) policy largely unchanged.

This means that items such as its infant formula, which are viewed as ‘Personal Use’, will not require first import licence approval.

In addition to its growing presence in Chinese stores, the A2 Milk Company relies on Chinese residents of Australia shipping back home significant amounts of their product.

Currently, the ‘Chinese and other Asia’ segment of their business has grown 163% over the past year and makes up 25.3% of their revenue.

The company previously recorded a 58.5% increase in earnings for the first four months to October 2018.

Good news not keeping pace with A2M share price

Despite this steady stream of good news, the share price of the company has headed downwards from the highs of February and March:

A2 Milk Share Price

Source: marketindex.com.au

One of the major events over this time period was the appointment of ex-Jetstar CEO Jayne Hrdlicka.

Upon assuming her new role, Ms Hrdlicka promptly sold a significant amount of her shares in The A2 Milk Company.

Combined with a current P/E ratio of 37.8, there are legitimate questions as to whether the company’s growth has already been priced into its share value.

Given its long-term potential however, and assuming no further regulatory hiccups, it could well come to have greater influence in the Chinese market.


Lachlann Tierney

PS: China’s New Boom: How three Aussie investments could be set to soar into 2018 and beyond. Get your free report.

Lachlann Tierney is an Analyst for Money Morning and has been investing for nearly a decade. With a Masters of Science from the London School of Economics, he brings a sound understanding of global markets to his writing. Lachlann is interested in emerging technologies, energy solutions and helping people invest their money wisely. Recently he has been working with Ryan Dinse. Lachlann is involved in two publications:

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