Analysis of the infant milk formula market by Morgan Stanley has called out Bellamy’s as the best value ASX-listed stock in its sector, spurring the company into the top sharemarket gainers yesterday. Up against peers A2 Milk and Blackmores, Morgan Stanley’s Thomas Kierath found Bellamy’s was significantly undervalued and on the “cusp of a turnaround”.
Morgan Stanley’s survey of 1500 infant milk formula buyers found Bellamy’s had developed a premium brand despite offering an inferior (omega-free) product and was poised for a boost ahead of its new formula launch and regulatory approval in China.
It came as the bank initiated coverage of Bellamy’s shares at “overweight” with a price target of $11 — above yesterday’s closing price of $8.39, up 9.7 per cent on the day, but well off its March highs of $23.Mr Kierath said the company’s consensus earnings expectations were near a trough and he saw opportunity for significant earnings growth.“Bellamy’s trades on 2.3 times estimated FY2020 enterprise value to infant formula sales ratio, versus A2 Milk at 7.2 times, which suggests both stocks are mispriced,” he said.
BAL Price at posting:
$8.80 Sentiment: None Disclosure: Not Held
