Synlait Milk has received a reduced demand forecast from its only finished infant formula (IFC) customer, The a2 Milk Co ((A2M)).
Synlait Milk now expects FY21 IFC volumes to be down -35% on the previous corresponding period and FY21 profit (NPAT) is expected to fall around -50%.
Morgans reduces FY21-23 profit forecasts by -48%, -32% and -21/%, respectively. This results from a combination of lower IFC volumes and weaker margins driven by reduced fixed overhead recovery.
There remains too much earnings uncertainty for the broker and consequently the Hold rating is maintained and the target price is decreased to $4.18 from $5.87.
Sector: Food, Beverage & Tobacco.
Target price is $4.18.Current Price is $4.60. Difference: ($0.42) – (brackets indicate current price is over target). If SM1 meets the Morgans target it will return approximately -10% (excluding dividends, fees and charges – negative figures indicate an expected loss).
