Chinese tariffs have hit
-Expectations are that Treasury Wine's Asian business will return to pre-covid sales by FY24
-The volume of Australian wine exports to
-Treasury Wine is exploring alternative luxury markets via targeted marketing campaigns
By
Following
Starting from mid-January in 2020, Treasury Wine shares have lost approximately -33.6% versus the 2.2% net gain booked by the ASX200.
While brokers and pundits generally assumed the heavy five-year Chinese tariff is the key detriment to the free-fall of the share price, on the positive side Credit Suisse analysts, among others, have already expressed their view the company's Asian business will return to pre-pandemic levels in FY24.
More importantly, the prospect of Treasury Wine does not seem as bad as it sounds. When taking a closer look at its one-year share price, the stock is currently showing signs of consolidation breakout after pondering on the mid-range of 52-week high and 52-week low.
Strategy
Although
Apparently, according to press reports, investors are betting that Australian wine shipments (Penfolds) will turn to the grey market in
Goldman Sachs analyst
Looking at Treasury Wine's most recent interim result and investor presentation, the company is restructuring its
The new focus is on luxury growth markets in the US,
The company also signed an agreement with the
While this stop-loss measure helps Treasury Wine to buy time during a difficult period, the company is heading to divest a significant portion of the commercial brand portfolio in the US, which enables management to further focus on higher margin luxury wine that supports the regional margin target of 25% in operational earnings.
Optimisation plan
Macquarie has already increased its own operational profits forecast to
The broker's recent research update suggests negative news with material effect to the share price is by now mostly priced in.
The wine company expects lower second half earnings when compared to the first half due to the provisional tariff from
Not giving up on China
Despite all disruptions and cautious plans to reallocate trade in the regions of the
Treasury Wine looks to transform Penfolds into using grapes from
The
The long-term goal is to sit on a margin between 40 to 45%, with hopes to invest directly in
Postlude
Let's not forget the impact of covid-19 on Treasury Wine's business. This unfavourable pandemic has played a huge part in the decline of earnings.
All regions (
With hopes of reopening and consistent recovery of consumption in a number of markets including
When looking at the seven stockbrokers monitored daily by FNArena, it is clear from the onset that caution dominates.
The consensus price target for these seven is below the present share price. Only one of these seven -stockbroker Morgans- has put forward a twelve-month price target that is still well above today's share price.
Not surprisingly, the stock only generates one Buy rating, amidst five Neutral/Hold ratings and one Sell from Citi.
Treasury Wine shares have rallied from near
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