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2 ASX shares rated as buys by brokers

In this article are two ASX shares rated as buys by brokers. One of those picks is infant formula business A2 Milk Company Ltd (ASX:A2M).
The post 2 ASX shares rated as buys by brokers appeared first on The Motley Fool Australia. –

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Brokers regularly update their estimates and recommendations about many ASX shares. The two in this article have been rated as buys by at least three brokers. 

Some ASX shares are well liked by many brokers, whilst others get mixed reviews. 

These two ASX shares are ones rated as buys by brokers:

A2 Milk Company Ltd (ASX: A2M)

A2 Milk shares are liked by at least four brokers including UBS and Morgans.

The A2 Milk share price is down by around 45% over the last six months.

UBS believes that A2 Milk could benefit from a recovery of sales with infant formula as it reactivates its daigou channel over the next year and a half. The broker also thinks that company could achieve market share gains at Chinese mother and baby stores.

However, whilst there continues to be COVID-19 restrictions for international visitors, combined with disappointing export data, it’s likely that there will be weak infant formula sales for the time being.

A2 Milk itself has admitted to these problems. In the most recent update the company said that the disruption in the daigou channel, which represents a significant portion of the infant nutrition sales in the Australia and New Zealand business, was proving to be more significant and protracted than was previously anticipated.

One problem for the ASX share is that the daigou channel disruption is having a material impact on the cross border e-commerce channel (CBEC). A2 Milk says that the daigou channel plays an important role in stimulating demand across multiple sales channels, including CBEC.

A2 Milk said that it intends to strengthen its focus on reactivating the daigou channel in the second half of FY21.

On the mother and baby store (MBS) front in China, A2 Milk said that this remains very strong – it’s expecting to report revenue growth of 40% from this channel. The 12-month rolling market value share in MBS also continues to increase, it was 2.3% as at the end of October, with increases in both same store sales and the number of new stores in the first half.

ResMed Inc (ASX: RMD)

The ASX share is rated as a buy by at least three brokers.

ResMed recently announced its FY21 second quarter result for the three months to 31 December 2020.

In US dollar terms, it said that revenue increased by 9% to $800 million and went up 7% on a constant currency basis. The non GAAP (generally accepted accounting principle) gross profit margin improved by a further 20 basis points to 59.9%.

Net operating profit went up by 12%, whilst non GAAP operating profit went up 16%.

In the company’s core businesses of sleep apnea, chronic obstructive pulmonary disease (COPD) and asthma it’s seeing improvements in new patient volume and ongoing adoption of the mask and accessories resupply program. ResMed has also seen accelerated adoption of digital health and an increase in the usage of out-of-hospital healthcare over the last 12 months.

The above result was better than Morgans was anticipating with the revenue growth and expanding gross margins. The broker also liked the limited expense growth, leading to growing operating leverage.

Morgans thinks that ResMed’s core sleep apnea business will steadily improve whilst the mask supplies remain in strong demand.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool Australia has recommended ResMed Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post 2 ASX shares rated as buys by brokers appeared first on The Motley Fool Australia.

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