A2 Milk’s downgrade to guidance will hurt FY26e EBITDA but the impact in FY27e should moderate. We lower our FY26e EBITDA by 12% and FY27e by 6%. For FY28e, our downgrade is only 3%. The downgrade is mostly a function of lower shipments of infant formula given reduced supply from its manufacturer and longer approvals for customs clearance. Higher air freight costs account for close to one-third of the downgrade. We move from Underweight to Hold on A2 Milk and see the potential for a special dividend at the full-year result to support the stock. Our revised target price is $7.60 (previously $8.30).