Citi cautious on antipodean infant formula makers as China birth rate declines

Bubs Australia

11/07/2023 04:31

** Analysts at Citigroup are cautious on the antipodean
infant formula sector on challenging industry conditions as
birth rate in key market China declines
    ** Says "declining birth rate in China remains a major
headwind", but expects potential upside to birth rate in CY24
    ** Brokerage prefers a2 Milk Co  ATM.NZ  over Bubs Australia
 BUB.AX  on ATM's "relatively better China execution, greater
scale and stronger balance sheet"
    ** Trims FY24, FY25 NPAT view for ATM on lower English label
sales and headwinds from birth rates in China
    ** Cuts FY23 NPAT view for BUB reflecting
lower-than-expected sales; hikes FY24, FY25 estimates on higher
gross margins
    ** Expects BUB's strategic uncertainty to persist until EGM
on July 27, where board overhaul proposals will be put to vote

         Company               Rating        Price Target (A$)
                                               New       Old
    a2 Milk  A2M.AX            Neutral         5.30      5.35
 Bubs Australia  BUB.AX   Neutral/High Risk    0.23      0.19
 
 (Reporting by Sameer Manekar in Bengaluru)
 ((Sameer.Manekar@thomsonreuters.com; Twitter: https://twitter.com/sameer_manekar))