Morningstar lowers earnings forecast for a2 Milk on declining birth rate in China

Morningstar lowers fiscal 2026 EBITDA forecast for New Zealand's a2 Milk ATM.NZ by 2% to NZ$306 million ($178.40 million) and their longer-term forecasts by about 5% on average, noting declining birth rates in top target market China

Brokerage notes most of dairy co's earnings are generated from selling infant formula to China; co's stock has fallen 12.1% since Monday after news that 2025 birth rates in China declined 17% compared to 2024

"We expect births to continue to decline over the next decade, albeit more gradually," Morningstar says

However, brokerage adds co can offset fewer babies with price increases and further market share gains, provided consumers continue to place premium on co's brand

Although, Morningstar expects this to come at higher marketing costs as brands compete in smaller market

Raises fair value estimate by 16% to NZ$9.30, saying reduction to earnings forecasts is more than offset by lower weighted average cost of capital assumption

ATM down 10% YTD, after gaining 71.1% in 2025

($1 = 1.7153 New Zealand dollars)