Treasury Wine Estates: Now no. 1 in the US luxury wine market

About the author:

Author name:

By Belinda Moore

Job title:

Senior Analyst

Date posted:

08 November 2023, 7:00 AM

Sectors Covered:

Agriculture, Food & Beverage, Travel and Chemicals

• Treasury Wine Estates (ASX:TWE) has announced the acquisition of Paso Robles luxury wine business, DAOU Vineyards (DAOU) for US$900m (A$1.4bn), funded by equity and debt.
• The acquisition is in line with TWE’s premiumisation and growth strategy and will strengthen a key gap in Treasury Americas (TA) portfolio. Importantly, DAOU has generated solid earnings growth and is a high margin business. TWE has consequently upgraded its margins targets. The acquisition is EPS accretive from FY25 and +US$20m of cost synergies are expected by FY26.
• We have upgraded our forecasts. On an FY25F PE of 17.5x, TWE is trading at a material discount to its 5-year average of ~25x and we maintain an Add rating. The key near term catalyst is China removing the tariffs on Australian wine imports.

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