U.S. Market Remains Evasive for a2 Milk, but China Is Its Main Game and Underpins Our Unchanged FVE

A2 Milk's door to the lucrative U.S. infant formula market is shut following notification from the U.S. Food and Drug Administration, or FDA. The 8% fall in a2's share price suggests the market had become overly optimistic on the U.S. opportunity amid upbeat media speculation in recent weeks. This is despite persistently cautious management commentary when referring to the U.S. infant formula opportunity. We make no changes to our forecasts (as we had not assumed any U.S. infant formula sales), and our NZD 8.00 (AUD 7.20) fair value estimate remains intact.