SM1 – Morgans rates the stock as Downgrade to Reduce

In the wake of the recent downgrade from The A2 Milk Co ((A2M)),  Synlait Milk has flagged significant uncertainty and volatility is impacting its business and withdrew FY21 guidance.

Morgans makes material forecast downgrades, lowers the rating to Reduce from Hold and the target price is decreased to $2.78 from $4.18. Balance sheet risk is considered to be heightened and an equity raising not ruled out.

The broker highlights a slide in infant formula sales volumes will reduce overhead recovery and increase production of lower-margin ingredient products.

Sector: Food, Beverage & Tobacco.

 

Target price is $2.78.Current Price is $3.24. Difference: ($0.46) – (brackets indicate current price is over target). If SM1 meets the Morgans target it will return approximately -17% (excluding dividends, fees and charges – negative figures indicate an expected loss).

 

 

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