Citi upgrades Treasury Wine to 'buy'
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The news: Citi analysts have upgraded Treasury Wine Estates to ‘buy’ from ‘neutral’ citing an acceleration in Australian wine exports to China and the recent decline in the company’s share price.
The numbers: The brokerage kept its 12-month price target on Treasury Wine shares at $12.97 and made no changes to its earnings forecasts.
Shares in the company were up 1% to $11.72 in early trading on the ASX. However, over the last month the stock is still down more than 2%.
The context: Citi analysts said they are incrementally more positive on the recent improvement in data from the company’s recent acquisition DAOU, with a better-than-expected outlook for the brand.
They also noted the China recovery is “exceeding expectations” given the broader macro weakness. Australia’s top winemaker last week reaffirmed its full-year earnings guidance after delivering double-digit net sales revenue (NSR) growth in the first quarter.
Citi pointed to data sourced from its own research along with Wine Australia that showed bottled red wine exports to Asia were up 210% in the September quarter, with growth being driven by China following the removal of export tariffs on Australian wine.
Citi says the second half of FY25 will provide a clearer and more certain indication of end user demand.
Key risks which need to be closely monitored include future China customer orders being adversely impacted by parallel importing and consumer sentiment as well as underperformance of 19 Crimes, the analysts said.
The source: Citi research
