The A2 Milk Company Ltd (ASX: A2M) share price closed 3.26% higher at $17.10 per share on the ASX yesterday, and has just opened today's trade at a new record 52-week high of $17.25.
So while the ASX infant formula companies are performing strongly this year, can the a2 Milk share price keep posting gains and push towards the $20 mark by the end of 2019?
Why the a2 Milk share price surged higher yesterday
Yesterday's surge in the a2 Milk share price came despite the New Zealand-based dairy group reporting no news to the market, with the big catalyst being Bubs Australia Ltd (ASX: BUB).
The Bubs share price exploded in early trade and surged 12.7% at market open after the Aussie dairy group recorded a record quarter to close out the 2019 financial year (FY19).
Bubs reported a 179% increase in yearly revenue to $51.3 million as the company's busy year in the M&A space, combined with significant sales agreements, saw it post a bumper result ahead of the August reporting season.
The company entered into a joint venture with China-based dairy group Beingmate in March 2019, which was the key to unlocking Bubs' organic food products growth in its Q4 2019 results.
The company also acquired Australia Deloraine Dairy for $35 million in the last few months and most recently signed a 4-year agreement with Chemist Warehouse to expand its product outlets throughout the pharmacy chain's 450 stores across Australia.
What's all this got to do with a2 Milk?
The strong Bubs result saw gains across the board for the Australian and New Zealand infant formula groups, with the a2 Milk share price surged accompanied by minor gains for Wattle Health Australia Ltd (ASX: WHA) and Bellamy's Australia Ltd (ASX: BAL).
a2 Milk remains the incumbent in the sector with strong fresh dairy products combined with its good footing in the lucrative Asian infant and baby formula market, ahead of its competitors (for now).
While we wait and see what a2 Milk produces in its full-year results in August 2019, if we see similar trends and strong margin protection from the group then I'd expect the a2 Milk share price to smash its current $17.25 record high.
However, with a significant number of competitors snapping at its heels and headwinds building in Chinese regulatory conditions, I'd also expect to see some volatility in the short-term, particularly if the company's August result misses analyst estimates.
