Treasury Wine Estates: Penfolds continues to outperform

About the author:

Belinda Moore
Author name:
By Belinda Moore
Job title:
Senior Analyst
Date posted:
16 August 2023, 6:30 AM
Sectors Covered:
Agriculture, Food & Beverage, Travel and Chemicals

  • While Treasury Wine Estates’ (ASX:TWE) headline numbers were solid given the challenging macro-economic backdrop, we note that growth slowed materially in the 2H23 due to Treasury Americas (TA) and Treasury Premium Brands (TPB). Importantly, Penfolds growth was strong. Cashflow disappointed but was impacted by timing issues.
  • TWE is targeting high single digit EBITS growth in FY24. We expect a weak 1H24 followed by solid growth in the 2H24. With greater US Luxury supply, earnings growth should accelerate in FY25. We have made minor upgrades to our forecasts.
  • Trading on an FY25 PE of 18.6x, TWE is trading at a material discount to its 5-year average of 25x and we upgrade to an Add rating. The key near term catalyst is China removing the tariffs on Australian wine imports.

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