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>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

<ul><li>The a2 Milk Company’s (ATM) AGM update was positive (revenue guidance range lifted from high single-digit growth to low double-digit growth), albeit largely as we expected.</li><li>Lifting the guidance at this early stage in FY26 highlights a solid start to the year (per our data in our note Moomentum, published 17 November 2025), likely driven primarily by English Label (EL) infant formula.</li><li>We retain our UNDERPERFORM rating, reflecting the elevated valuation, but more broadly remain positive on ATM’s outlook for market-share gains and margin expansion, reflected in our ~+14% FY26–FY29 EPS CAGR.</li></ul>

The a2 Milk Company’s (ATM) AGM update was positive (revenue guidance range lifted from high single-digit growth to low double-digit growth), albeit largely as we expected.Lifting the guidance at this early stage in FY26 highlights a solid start to the year (per our data in our note Moomentum, published 17 November 2025), likely driven primarily by English Label (EL) infant formula.We retain our UNDERPERFORM rating, reflecting the elevated valuation, but more broadly remain positive on ATM’s outlook for market-share gains and margin expansion, reflected in our ~+14% FY26–FY29 EPS CAGR.

<ul><li>Our mosaic of datapoints suggests the a2 Milk Company (ATM) has had a solid start to FY26.</li><li>Overall, we remain positive on the earnings outlook for ATM (FY26–FY29 EPS CAGR of ~+14%), but current valuation levels are unsustainable.</li><li>On the balance of probabilities, we see the risk–reward as negatively skewed.</li></ul>

Our mosaic of datapoints suggests the a2 Milk Company (ATM) has had a solid start to FY26.Overall, we remain positive on the earnings outlook for ATM (FY26–FY29 EPS CAGR of ~+14%), but current valuation levels are unsustainable.On the balance of probabilities, we see the risk–reward as negatively skewed.

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>Our long-term outlook remains bullish on global equities (MSCI ACWI). Germany and Europe continue to lead, our favorite theme we have been buying since January 9th.</li>
<li>Near-Term we wouldn't be surprised to see a pullback to range supports at $116 on ACWI-US and 5770-5850 or 5600-5670 on SPX in the coming weeks, where we are buyers.</li>
<li>This report was initially sent out Thursday morning, and as of this writing SPX is now testing support at 5850. Bottom potential.</li>
</ul>


Our long-term outlook remains bullish on global equities (MSCI ACWI). Germany and Europe continue to lead, our favorite theme we have been buying since January 9th.
Near-Term we wouldn't be surprised to see a pullback to range supports at $116 on ACWI-US and 5770-5850 or 5600-5670 on SPX in the coming weeks, where we are buyers.
This report was initially sent out Thursday morning, and as of this writing SPX is now testing support at 5850. Bottom potential.


Germany and Europe Continue to Lead; Remain Overweight Germany and U.S.; Bullish Outlook Intact

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 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

The A2 Milk Company Tickety-Boo

The a2 Milk Company’s (ATM) AGM update was positive (revenue guidance range lifted from high single-digit growth to low double-digit growth),...

Forsyth Barr

The A2 Milk Company Moomentum

Overall, we remain positive on the earnings outlook for ATM (FY26–FY29 EPS CAGR of ~+14%), but current valuation levels are unsustainable.

Forsyth Barr

Germany and Europe Continue to Lead; Remain Overweight Germany and U.S.; Bullish Outlook Intact

Germany and Europe Continue to Lead; Remain Overweight Germany $DAX $EWG and the U.S. $SPX; Bullish Outlook Intact on $ACWI above $116. $SPX...

Vermilion Research

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