What brokers are saying about A2 Milk (ASX:A2M) and Hipages (ASX:HPG)

Is it time to buy these shares?
The post What brokers are saying about A2 Milk (ASX:A2M) and Hipages (ASX:HPG) appeared first on The Motley Fool Australia. –

If you’re interested in growth shares, then you might want to hear what brokers are saying about the two listed below.

Are these shares in the buy zone? Here’s what these brokers think:

A2 Milk Company Ltd (ASX: A2M)

This infant formula company is one of the most divisive shares on the Australian share market right now. Some believe China’s slowing birth rate and structural changes in the daigou and China market mean its glory days are behind it, whereas others believe it will bounce back in the coming years.

The team at Bell Potter is among the latter and remains positive on its outlook. As such, the broker currently has a buy rating and $7.70 price target on its shares.

Following its strategy update, Bell Potter commented: “A2M have indicated a medium term target of ~$2.0Bn in revenue with a target margin in the teens. A margin of low-mid 20’s would be achievable longer-term, subject to a higher EL [English label] recovery and market share gains. The revenue targets compares to our FY24e target of ~$1.6Bn and so is a fairly material uplift if achieved.”

The broker also believes the company’s targets in China are achievable. A2 Milk is aiming to double its market share through an expansion in mother and baby stores (MBS) distribution from 23.8k stores to 30k-35k stores.

“Based on the respective margin contributions, the main divers of success will largely be dependent on the extent that English label sales recover and growth in the China MBS footprint. In our view the runway to expanding MBS channels is achievable when viewed in the context of competitors and based on average sales rates by A2M and competitors, achieving the distribution expansion alone would add NZ$200-400m in revenue. As such we do not see the PRC label target as particularly aggressive,” it added.

Hipages Group Holdings Ltd (ASX: HPG)

The team at Goldman Sachs is very positive on this tradie marketplace operator. The broker believes Hipages is well-positioned for growth over the long term thanks to its huge market opportunity and growing subscription revenues.

Goldman has a buy rating and $4.90 price target on the company’s shares

It commented: “HPG is delivering on its strategy of growing its core and entering new category channels and adjacencies to expand in the A$110bn tradie marketplace TAM. Recently we have seen the company enter the field service software market through the release of Tradiecore in June 2021.”

“At the August FY21 earnings release the company announced its intention to enter the related payments and financial services adjacencies to its core tradie marketplace. We believe this solidifies the group’s ability to grow subscriptions and ARPU over the medium term, and we have adjusted our forecasts accordingly,” Goldman added.

The post What brokers are saying about A2 Milk (ASX:A2M) and Hipages (ASX:HPG) appeared first on The Motley Fool Australia.

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More reading

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Crying over the A2 Milk (ASX:A2M) share price? Here’s what management is planning

5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Hipages Group Holdings Ltd. The Motley Fool Australia has recommended A2 Milk and Hipages Group Holdings Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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