JPMORGAN - Raised to Overweight PT $14

CLSA - Raised to Buy PT $16.70

From Citi

"Treasury’s US off-premise performance has been strong during December (a key trading month) having significantly outperformed the industry. While this is pleasing, there continues to be datapoints suggesting risk to the higher margin on-premise and cellar door channels given consumer spending may be increasingly challenged over CY23 by rising cost of living pressures which underpins our Neutral rating. We see Treasury a fundamentally better business today relative to pre-China tariffs with long duration growth likely to be supported by premiumisation and distribution growth. Treasury is trading at 25x FY23 PE. Maintain Neutral."

Pretty luke-warm rating and no mention of possible tariff reductions from China. 25x is a high PE and perhaps it can only be justified by that upside chance.

News around the traps is that China may start taking Australian Coal as soon as April. Albo and Penny are doing a good job of wooing China so one has to wonder if they will wind back the excessive wine tariff. That could see TWE back over $18.

A few cases of Penfolds could be a good liquid investment but TWE shares are easier to trade : )

Despite Dan Andrews instructions to get on the beers, it seems we have switched as a nation from beer to wine. Australian consumption preferences are now bottled wine is 34% of the market, regular strength beer 19%, although if you add mid and low strength, total beer is 33% bottled spirits are around 15% and then there is the rest.

Treasury is in the market if flogging us wine, they hold some respectable brands including Penfolds. 

The business has been significantly covid restriction, supply chain interruptions, and China no longer friends with Australia impacted – if you recall they slapped 200% tariffs on Australian wine imports. 

The company is attempting to circumvent this by growing grapes for Penfolds in France. CEO Tim Ford said the company plans to launch a French collection of Penfolds. Ford said, “It’s going to take us multiple years as we build up our luxury wine portfolios out of France and America to really meet that demand over time, and we look at that as a long-term journey to rebuild our market there in China.”

Results released today for the half ending December ‘21:

• Revenue of $1.27 billion, down 10.1% year-on-year 
• Earnings before a myriad of acronyms of $262.4 million, down 6.7% year-on-year 
• Net profit after tax of $109.1 million, down 7.5% year-on-year
• Interim dividend of 15.0 cents per share fully franked

The market though this was ok, mostly as the business managed to grow without China. 

Ford said the business is shifting from ‘recovery and restructuring’ to one of ‘growth and innovation’. 

This is where you must have a leap of faith that restriction and supply chain issues will see consumers returning as before, and they can resurrect the China market by other means. In my mind this is the primary question, but competitors are not going to sit on the sidelines. 

This one is not currently on my shopping list. I still like beer.

Treasury reported improved trading in all markets except China and EMEA. Asia ex-China was particularly strong with EBIT up 51 per cent. COVID-19 continues to impact some higher margin markets and of course China’s tariffs have squashed sales there. NPAT of $310 million was slightly ahead of most analysts’ expectations but revenue and EBITDA slightly missed.

Revenue came in at $109 million versus consensus of $112 million and EBITDA was $49.4 million versus consensus of $51.4 million. Cash flow conversion was notably strong at 107 per cent of NPATA.

Source: Roger Montgomery 23 Aug 2021

Jefferies raises PT on Australia's Treasury Wine TWE.AX to A$14.50 from A$13.50, maintains a 'buy' rating on the stock. Says while co's results were in line with its estimates, strong result from Asia provided evidence that wine has been reallocated from China very quickly, despite the disruption caused by COVID-19. Expect reallocation to continue and to be compounded by a COVID recovery in higher margin channel, and continued premiumisation, paving the way to high single digit growth. - Analysts at Jefferies have raised co's FY22 underlying profit estimates by 3.8% to A$334.5 mln ($239.03 mln)  While value of inventory declined by 9%, the inventory of co's luxury and premium products is sufficient to deliver our forecast for FY22 - Five of 15 analysts rate the stock 'buy' or higher, seven rate it 'hold' and three 'sell'; their median PT is A$12.20

Interesting article in The Age 15/5 about Treasury's US expansion using Snoop Dog as their front for advertising.  Getting good uptake in the younger/cheaper market.  Worth a read.  May give the direction required during China woes.  I do think they will execute in to other parts of Asia reasonably over time.  It wont be massive growth but could be steady over many years.

A good double handed middle finger up to the Chinese Communist party, Treasury Wine Estates (TWE) jumped 6.26% after laying out a clear US-focused growth plan for the next five years, which will go some way towards offsetting losses from Chinese tariffs. US focused growth including expansions into neighbouring Canada could bring back strength to TWE share price. 

China have applied 116% to 218% levies for next 5 years. Laying a bit of a sledgehammer on what was already known to a certain extent.

it's a blow but I think TEP capital straw below  gives an overview on their being a solid enough business outside of China 

Monday may present a buying opportunity for this blue chip and a long longterm outlook 5+ years.

I don't believe the levies will stay around forever, their will be a continued taste for Aussie wines for years to come.

TWE - very strange 3 day price action down to $9 back up to $11

this very strange scenario continues around TWE price movements early in the session.

after a significant sell off early in the week which was entirely pegged back later in the same day, company results out yesterday and then today pushing higher through prior resistance, what a crazy 3 days

Prior to all this the share price was hovering around the $10.20 range for a couple of weeks.

TWE - very strange price activity upon open the day prior to results coming out

This is one of the strangest sell offs at open I've seen for such a large cap company, in addition to gapping down from the prior close, the price then touched below $9.00 ( ~10% further down) briefly before nudging back up on what looked like small parcel order sizes.

Strange to say the least, and being the day prior to the Half Year results is interesting timing.

We did see a news story about knock off wine labels trying to emulate the Penfolds brand image, but that's been happening for years.

No news or company announcements at all at it's almost 6pm AEST, so today is pretty much over and done with

I know the Broker Valuations are widely spread for TWE, but this has the markings of a Sell At Market order (I hope intentially for that person if the case) all being dumped at Open.

It's probably got me very much being a sideline watcher until the results are out and digested by the analysts

With the news that the Beijing Ministry will apply a tariff rate of between 107 per cent and 212 per cent on Australian wines, there has been considerable political chat, but not much discussion about what this implies for the valuation of this blue-chip ASX company.

Let's take a quick back of the envelope look at what is the worst-case scenario and then build our investment case from there. For the below analysis, I have looked at the NSR (net sales revenue), EBITS (earnings before interest, tax, SGARA and material items) and NPAT (net profit after tax) of Treasury Wine Estates at the group level AND ex-Asia.

Looking at the group level results ex-Asia is extremely conservative for 2 reasons. Firstly, China obviously does not comprise 100% of TWE's Asian sales and profits. Secondly, even with harsh political tariffs on Australian products, it is not going to eliminate all of TWE's China sales/profits. But, regardless, let's look at this because it gives us a baseline for what is the absolute floor in the share price.

I am also using FY19 results not FY20 results, which were impacted by lockdowns around the world. This is because any investor buying into TWE at this stage is no doubt investing on the thesis that the world will emerge into a post-lock down world in CY2021 and beyond. The markets are forward-looking and the norm for TWE moving forward is a non-lockdown world. This is a blue-chip company and it has decades that lie ahead of it.

Post trading halt, the share price stood at circa $9 after the stock was sold off approximately 11% on the last trading day. $9 equates to a market cap of circa $6.5B AUD. This corresponds to a PE multiple of 15.5x for the Group level and a PE multiple of 28x for the Group level Ex-Asia on FY19 results. I.e. At $9, you are paying a PE of 28x if you assumed that the entire Asian division of TWE was eliminated entirely.

What is a fair value earnings multiple for TWE?

• The historical 5-year average PE ratio of Treasury Wine Estates Limited is 25x
• The PE ratio of TWE's peer group (Constellation Brands, Jiugui Liquir Co, United Spirits, Compania Cervecarias, Remy Cointreau) is 27x
• The PE ratio of the sector (Distillers & Vintners) is 23x

Conclusion:

My conclusion is that even when you consider the extremely conservative and hypothetical scenario in which TWE's Asian operations are eliminated entirely, the current share price ($9) already prices this in. At $9, you are paying an FY19 PE of 28x for the business EX ASIA. This is in-line with TWE's 5-year historical PE average. This is in-line with TWE's peer group PE. This is in-line with the PE ratio of the sector. The share price at $9 is an excellent bet for a long term hold.

T.E.P.

I recently completed a big university assignment on TWE and found them quite interesting.

Their US operations have performed poorly leading to a poor half yearly result in January.

In the short term i think there is massive downside risk, which outweights any potential return given the likely trade complications with China and Covid related production issues with vinyards in Europe (France). 

The potential de-meger of Penfolds will be an interesting watch, potentially in 2021.

The only way i can see a buy here is for an extended investment period (5-10 years), where a recovery from COVID is realistic and they can get back to decent financial performance

Decline from all time high and expecting some headwinds in the short term with China trade tensions but big potential as trade and COVID restriction ease in long run. 
also Penfolds separation potential makes for an intriguing opportunity 

- Litigation cases stains TWE's reputation putting strain on their future viability

- Penfolds an unsuccessful spin-ff due to various reasons (poor management, funding issues, etc)

- Covid-19's effect on wine production and world trade has long-term effects which severly handicap TWE's world operation

08-Apr-2020:  Strategic review outcomes and COVID-19 update

The big news here is Treasury Wine's update on the outcomes of their strategic review and that they are considering a demerger of the Penfolds business and associated assets into a separate ASX-listed company by the end of 2021.

29-Jan-2020:  1H20 Profit Report, Revised F20 Guidance & Presentation

TWE are down over 20% so far today on the back of this guidance downgrade.  That could be an overreaction (which would be pretty typical for our market) but it could also be the start of worse to come.  Downgrades often come in threes.  The first is rarely the last.  I don't follow TWE closely, but I note they describe US Market conditions as "Challenging" and anything that is China facing seems to be getting sold off on Coronavirus concerns.  TWE are really an export story now, and if they are finding those export markets to be "challenging", that's not a good sign.

Good results today from Treasury Wines 

• NSR2 up 17% to $2,831.6m
• F19 EBITS4 up 25% to $662.7m 
• EBITS margin accretion to 23.4%, up 1.6ppts
• NPAT5 up 16% to $419.5m
• EPS6 growth to 58.4 cents per share, up 18%
• Full year cash conversion 75.8%, ahead of the 60-70% guidance range, with Operating Cashflow7 up 36%. Lease adjusted net debt to EBITDAS 1.7x8 , an improvement of 0.2x in F19