Risk Reward Update

Research evidence excerpt

Risk Reward Update

Update

June 25, 2026 07:30 AM GMT

Morgan Stanley Australia Limited+MA2 Milk Company Ltd | Asia Pacific Julia M de Sterke

Equity Analyst

Risk Reward Update Julia.De.Sterke@morganstanley.com +61 2 9770-1658

What’s Changed

A2 Milk Company Ltd (ATM.NZ) From To

Price Target NZ$11.90 NZ$10.90

Bull Case NZ$13.30 NZ$12.00

A2 Milk Company Ltd (ATM.NZ, ATM NZ)

Base Case NZ$11.90 NZ$10.90

Bear Case NZ$8.30 NZ$7.50 Australia Consumer | Australia

Updated Components Stock Rating Overweight

EPS Industry View Cautious

Price target NZ$10.90

Bull Base Bear Scenarios

Shr price, close (Jun 24, 2026) NZ$8.47

Risks to Price Target / Rating 52-Week Range NZ$11.90-6.25

Fiscal Year Ending 06/25 06/26e 06/27e 06/28e

Risk Reward for A2 Milk Company Ltd (ATM.NZ) has been EPS (NZ$)** 0.28 0.28 0.34 0.41

Prior EPS (NZ$)** - 0.28 0.36 0.43

updated

Unless otherwise noted, all metrics are based on Morgan Stanley ModelWare

framework

Reason for change ** = Based on consensus methodology

e = Morgan Stanley Research estimates

We update FY26-29e estimates. Earnings are cut by an average of 4.9% in FY27-29e,

reflecting primarily i) expectation of impact of product recalls and supply issues

extending into 1H27, with a more tapered recovery in 2H27/1H28, ii) adjustments to

D&A expense expectations.

We cut our EV/EBITDA multiple from 21x to 18x FY29e earnings reflecting elevated

near-term uncertainty relating to formula recalls and supply challenges. 18x is ~1SD

above 5yr mean, which we view as justified given vertical margin capture from

Pokeno, future lower reliance on Synlait, and expanded product portfolio,

underpinning future market share gains. We make no other changes to our valuation

methodology. We value A2M on a 50/50 DCF and EV/EBITDA multiple valuation on