A2M/A2 Milk

The A2M (milk and infant formula company) was quite impressive. That second bullet point there, growing sales despite a double-digit decline in China’s infant milk market is remarkable.

Demographics looks like this…

And the size of the prize (market pie) looks like this.

In other words, A2M seem to be doing well competing into a shrinking market, which is very impressive.

But, we don’t think it’s very cheap (both the headline multiple, and our various regression to fundamentals models) and, it is frankly easier and usually better to invest in growing markets. Anything less than excellent execution tends to end very badly, where irrational competition, hidden subsidies, and political friendships, can matter more than the ordinary everyday efforts of running a business.

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This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.

Please note that past performance is not a reliable indicator of future performance.

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