The a2 Milk Company (ASX:A2M, NZE:ATM) forecast aligned with an "incrementally more positive" outlook for the infant formula sector reported by infant formula ingredient supplier Clover Corp, according to a Tuesday report by the Australian, citing investment and financial services firm Citi.
Clover reported a 38% sales growth in the fiscal first half, driven by new products and a recovery in its infant formula business across Europe, Australia, and New Zealand, signaling improved demand from western manufacturers, Citi noted.
The company also reported inventory normalization after a stock build related to state administration for market regulation renewals in fiscal 2023, Citi said.
Citi analyst Sam Teeger expects this positive momentum to benefit A2 Milk, with market forecasts predicting 13% infant formula revenue growth in the company's fiscal second half.
The investment firm also said that challenges like declining birth rate and competition from domestic brands have now become an advantage, supporting the company's growth and market share gains.
Citi maintained a2 Milk Company's buy rating and its price target of AU$8.20.
Shares of the company fell past 2% at market close in Australia and past 1% in New Zealand.
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