Jefferies has raised its price target for Treasury Wine Estates (TWE) from AUD14.00 to AUD16.00, maintaining a Buy rating for the company. This optimistic outlook is fueled by the anticipated benefits of China’s reopening, which is expected to significantly boost TWE’s earnings in the coming years.
Analysts predict minimal impact on TWE’s FY24 earnings but foresee a substantial rise in EBITS (earnings before interest and taxes) over the longer term. This projection is based on the company’s historical performance in the Chinese market, where it previously generated approximately AUD200 million in EBITS. With the assumption that TWE can recapture around 40% of this through increased volume and price adjustments, the company’s valuation could see an increase of approximately AUD2.00 per share.
These revised estimates are reflected in Jefferies’ updated discounted cash flow (DCF) model, which now projects a price target of AUD16.00. This adjustment is primarily driven by the anticipated EBITS uplift of approximately AUD88 million by FY27, as the Chinese market reopens and contributes to TWE’s financial performance.
InvestingPro data further supports this positive outlook, highlighting TWE’s strong market capitalization, P/E ratio, and revenue figures. The company’s profitability and stable financial position are also underscored by its gross profit margin and manageable debt levels.
InvestingPro Tips suggest that TWE’s high earnings and EBITDA valuation multiples may be attractive to growth-oriented investors. Additionally, the company’s recent strong returns could be a promising indicator for potential investors.
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Overall, the reopening of the Chinese market presents a significant opportunity for Treasury Wine Estates to recover lost revenue and improve its financial outlook. The upgraded price target and maintained Buy rating reflect confidence in the company’s ability to capitalize on these developments and deliver strong future performance.
