New Zealand Professional Investment Services Firm, Forsyth Barr

Forsyth Barr

New Zealand Professional Investment Services Firm

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

Equity Bottom-Up

<ul><li>The a2 Milk Company (ATM) result was strong, with NPAT ~+7% ahead of consensus and little to fault within the mix.</li><li>ATM also announced the launch into the NZ$8bn China paediatric supplements category, with the launch of its China label (a2 Zhi Yi) range.</li><li>We would characterise the result as having very little for the bears and plenty for the bulls to layer growth expectations on.</li></ul>

The a2 Milk Company (ATM) result was strong, with NPAT ~+7% ahead of consensus and little to fault within the mix.ATM also announced the launch into the NZ$8bn China paediatric supplements category, with the launch of its China label (a2 Zhi Yi) range.We would characterise the result as having very little for the bears and plenty for the bulls to layer growth expectations on.

The A2 Milk Company 1H26 Result—Growing The Family

<ul><li>We upgrade our rating on The a2 Milk Company (ATM) to NEUTRAL from UNDERPERFORM.</li><li>Our change in view reflects two factors: (1) notable valuation multiple de-rating from when we downgraded to UNDERPERFORM in September 2025; and (2) ongoing strong execution, opening up earnings upside risk ahead of the 1H26 result (discussed throughout this report).</li><li>Absent earnings upside, we also see numerous potential catalysts over the next six to 12 months: (1) US FDA approval; (2) SAMR registration at a2 Pokeno; (3) competitor recall market share opportunities (albeit we are not convinced on this yet); and (4) further special dividends (our medium-term dividends are well ahead of consensus).</li></ul>

We upgrade our rating on The a2 Milk Company (ATM) to NEUTRAL from UNDERPERFORM.Our change in view reflects two factors: (1) notable valuation multiple de-rating from when we downgraded to UNDERPERFORM in September 2025; and (2) ongoing strong execution, opening up earnings upside risk ahead of the 1H26 result (discussed throughout this report).Absent earnings upside, we also see numerous potential catalysts over the next six to 12 months: (1) US FDA approval; (2) SAMR registration at a2 Pokeno; (3) competitor recall market share opportunities (albeit we are not convinced on this yet); and (4) further special dividends (our medium-term dividends are well ahead of consensus).

The A2 Milk Company A More Balanced Formula—Up To NEUTRAL

<ul><li>We expect a solid 1H26 result from The a2 Milk Company (ATM) when it reports on Monday, 16 February 2026.</li><li>1H26 continuing operations revenue growth (year-on-year) is expected to be higher than 2H25 revenue growth (year-on-year); we forecast ~+15% 1H26 revenue growth and, overall, our forecasts are broadly in line with consensus.</li><li>We are focused on: (1) English label revenue growth (we forecast ~+20%), in light of positive datapoints and the impact of a2 Genesis HMO within this (Genesis-specific datapoints are also positive); (2) a2 Pokeno progress (our channel checks suggest EBITDA losses may be less than guidance of -NZ$30m to -NZ$35m); (3) adjacent growth performance, noting the growing importance of ATM’s other nutritionals segment (we are particularly interested in performance of ATM’s new adult/senior powder products, along with a2 zhenzihu) and the emergence of Vietnam as a small, but helpful, growth driver; and (4) capital management—we suspect it is too early for ATM to foreshadow further capital management, particularly prior to SAMR registration being achieved at a2 Pokeno, but broad comments will be of interest (our medium-term dividends are well ahead of consensus).</li></ul>

We expect a solid 1H26 result from The a2 Milk Company (ATM) when it reports on Monday, 16 February 2026.1H26 continuing operations revenue growth (year-on-year) is expected to be higher than 2H25 revenue growth (year-on-year); we forecast ~+15% 1H26 revenue growth and, overall, our forecasts are broadly in line with consensus.We are focused on: (1) English label revenue growth (we forecast ~+20%), in light of positive datapoints and the impact of a2 Genesis HMO within this (Genesis-specific datapoints are also positive); (2) a2 Pokeno progress (our channel checks suggest EBITDA losses may be less than guidance of -NZ$30m to -NZ$35m); (3) adjacent growth performance, noting the growing importance of ATM’s other nutritionals segment (we are particularly interested in performance of ATM’s new adult/senior powder products, along with a2 zhenzihu) and the emergence of Vietnam as a small, but helpful, growth driver; and (4) capital management—we suspect it is too early for ATM to foreshadow further capital management, particularly prior to SAMR registration being achieved at a2 Pokeno, but broad comments will be of interest (our medium-term dividends are well ahead of consensus).

The A2 Milk Company 1H26 Preview—A Genesis Of Growth

<ul><li>Newsflow has continued to increase on the global infant formula recall, and we are receiving many questions from investors.</li><li>Our broad thoughts at this stage are: (1) we think The a2 Milk Company (ATM) is in the clear from any negative impacts, although we recognise why some investors are cautious; and (2) the possible China upside is hard to assess, given Danone’s China products source the problem ARA ingredient from another supplier and Nestlé’s China recall exposure is very limited.</li><li>This is clearly a sensitive situation, with newsflow (and our view) likely to evolve.</li></ul>

Newsflow has continued to increase on the global infant formula recall, and we are receiving many questions from investors.Our broad thoughts at this stage are: (1) we think The a2 Milk Company (ATM) is in the clear from any negative impacts, although we recognise why some investors are cautious; and (2) the possible China upside is hard to assess, given Danone’s China products source the problem ARA ingredient from another supplier and Nestlé’s China recall exposure is very limited.This is clearly a sensitive situation, with newsflow (and our view) likely to evolve.

The A2 Milk Company Infant Formula Recall What We Know So Far

<ul><li>2025 Chinese births were 11% below our expectations and down 17% year on year.</li><li>Despite share price weakness, under our revised China infant formula (IF) market assumptions, the market continues to price an optimistic ~15% long-term China IF market share (versus FY26E of ~7%).</li><li>We forecast the China IF market (by value) to decline at a ~-2% CAGR over the next five years (FY26-FY31).</li></ul>

2025 Chinese births were 11% below our expectations and down 17% year on year.Despite share price weakness, under our revised China infant formula (IF) market assumptions, the market continues to price an optimistic ~15% long-term China IF market share (versus FY26E of ~7%).We forecast the China IF market (by value) to decline at a ~-2% CAGR over the next five years (FY26-FY31).

The A2 Milk Company All Ladders, No Snakes

Australia

a2 Milk Company Limited produces cow milk which is free of a protein called beta casein A1.  The Company 
offers its products in Australia and New Zealand.

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A2 Milk Co Ltd (A2M AU)

The A2 Milk Company 1H26 Result—Growing The Family

ATM also announced the launch into the NZ$8bn China paediatric supplements category, with the launch of its China label (a2 Zhi Yi) range.

Forsyth Barr

The A2 Milk Company A More Balanced Formula—Up To NEUTRAL

Our change in view reflects two factors: (1) notable valuation multiple de-rating from when we downgraded to UNDERPERFORM in September 2025...

Forsyth Barr

The A2 Milk Company 1H26 Preview—A Genesis Of Growth

1H26 continuing operations revenue growth (year-on-year) is expected to be higher than 2H25 revenue growth (year-on-year); we forecast ~+15% 1H26...

Forsyth Barr

The A2 Milk Company Infant Formula Recall What We Know So Far

Our broad thoughts at this stage are: (1) we think The a2 Milk Company (ATM) is in the clear from any negative impacts, although we recognise why...

Forsyth Barr

The A2 Milk Company All Ladders, No Snakes

Despite share price weakness, under our revised China infant formula (IF) market assumptions, the market continues to price an optimistic ~15% long...

Forsyth Barr

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