A2 Milk Company Ltd (ASX: A2M) saw its stock soaring 5.10% in Tuesday's trading session, following the announcement of a significant supply chain transformation and expansion of its China market presence. The company's shares rallied despite reporting full-year results for FY 2025 that were slightly below some analysts' expectations.
The cornerstone of A2 Milk's strategic move is the acquisition of Yashili NZ, an integrated nutritional manufacturing facility in New Zealand, for NZ$282 million from a unit of China Mengniu Dairy. This acquisition brings with it two crucial product registrations for the China-label infant formula market, addressing what Jarden analyst Adrian Allbon describes as A2 Milk's "historical limitation of having only one China-label product registration compared to competitors who typically maintain portfolios of 5-21 registered products." Additionally, the company plans to divest its interests in Mataura Valley Milk to Open Country Dairy, a move expected to eliminate operating losses.
While Bell Potter maintained a hold rating on A2 Milk shares with a price target of A$7.85, citing full valuation at current levels, the market's positive reaction suggests investors are optimistic about the long-term benefits of the supply chain overhaul. The company's strategic moves are seen as positioning it for stronger growth in the crucial Chinese market, despite the short-term financial impact of the restructuring.