The A2 Milk Company Ltd (A2M.AX): 6.18 final rankings improve from pre-sale rankings – Citi F&B

Research evidence excerpt

The A2 Milk Company Ltd (A2M.AX): 6.18 final rankings improve from pre-sale rankings – Citi F&B

The A2 Milk Company Ltd (A2M.AX)

03 July 2026 Citi Research

The A2 Milk Company Ltd

Valuation

Our 12-month target price is $6.70 per share. Our target price is derived by rolling forward our valuation at the cost of equity,

less the next 12 months of dividends to be paid. Our valuation is derived through the average of our:

•PE relative valuation of $6.57

•DCF valuation of $8.42 and

•Sum-of-the-parts valuation of $3.73

Using a PE relative measure, we value A2 Milk relative to the ASX 200 Industrials FY27e multiple.

Our DCF valuation is derived using a beta of 0.95 and a WACC of 10%. Change in WACC reflects the change in share price or

debt levels, which impact enterprise value and thus WACC. We use a risk-free rate of 4.0% and a terminal growth rate of 3.5%.

Our SOTP valuation is derived comparing A2 Milk with domestic and international comparable companies in the dairy, infant

formula, and the overall FMCG space.

Risks

We see the following as the upside risks to achieving our forecasts and target price:

i) Global consolidation; ii) Chinese market volatility reduces faster than expected; iii) Legal uncertainty around functional

benefits is resolved; and iv) Faster-than-expected penetration into new markets.

The downside risks to achieving our target price include:

i) Failure to comply with food safety and quality standards; ii) Negative information regarding A1 Protein Free milk; iii) Certain of

a2 Milk’s intellectual property rights will expire or may weaken or be infringed by competitors; iv) Competitors may develop

products or brands that erode A2 Milk’s differentiation; v) Reliance on third parties; vi) Difficulties renewing licences, approvals

or consents.