The reason UBS is keen stems largely from growing brand recognition, with its own survey of 1,352 Chinese parents and pregnant women showing a “dramatic increase” in brand awareness and online performance, which analysts say is “stronger than currently anticipated by the market”.
“A2 Milk showed improvements in brand awareness, online availability and online sales,” analysts led by Jordan Rogers noted.
The data revealed 40 per cent of online shoppers recognised the A2 Platinum brand as against about 10 per cent of traditional channel shoppers.
The in-store recognition number was akin to that of Bellamy’s, but A2 Milk’s online recognition was more than double its local rival as it surged to sixth spot as ‘brand bought most often’ among online buyers.
“We believe this data is highly encouraging for the future of the A2 Platinum brand should its rollout into physical stores continue,” Mr Rogers said.
Further adding weight to the positive outlook was the discovery of several trends in A2’s favour, including a significant jump in the importance of being manufactured by a global brand in a trustworthy country (such as Australia or New Zealand) as well as a strong outlook for births following the cessation of the one-child policy.
Risks still lurk on the horizon, chiefly the prospect of Chinese regulatory changes, competitive pressures and need for marketing investment, but Mr Rogers concluded these were currently overshadowed by the growth opportunity.
UBS consequently raised its price target on the dual-listed A2 Milk from $NZ2.45 to $NZ2.75 ($A2.60) and altered its view from ‘neutral’ to ‘buy’, mirroring the outlook of Goldman Sachs and Bell Potter.
Should it reach the $2.60 mark it would represent an all-time high for the group, with the positive note helping drive its shares up 2.2 per cent to $2.35 by 3.40pm (AEDT) today.
The company serves as the benchmark among market darlings since the election of Donald Trump forced a rotation away from high growth companies to beaten-down financials and resources stocks.
Its shares have swelled 21.6 per cent since Mr Trump’s election win, while Bellamy’s — once royalty among market darlings after increasing ninefold in 2015 — has now lost 56 per cent since November 9, or around $700 million.
Bellamy’s traded down 1 per cent at $4.84 by 3.40pm (AEDT).
Other high growth favourites such as Domino’s Pizza and Aconex have also been hit with heavy selling, tumbling 12.5 and 37.5 per cent since the US election, respectively, while vitamins seller Blackmores has traded broadly flat.
The wider market has surged 9.6 per cent over the same period, aided by a strong bid on the big four banks and mining giants.