TWE closed up +5% yesterday following comments that Chinese wine tariffs could end in a few weeks, just in time for Anthony Albanese’s visit to Beijing later this year – a much-needed $1.2bn olive branch for our wine industry. Ambassador Xiao said some very encouraging words for the local wine players: “Between China and Australia, we have agreement that we will engage with each other. We will respect each other, we will find solutions to the disputes existing between the two countries,”.
The massive trade sanction imposed by China in 2020 forced TWE to reinvent itself into a luxury-focussed business with significant sales in the US. In FY23, sales were split between Treasury America at ~34%, Penfolds at ~34%, and Treasury Premium Brands at ~32%. As we said 48 hours ago, “we don’t believe that TWE has the potential upside from a reopening of the Chinese market built into its share price – TWE must believe it’s a possibility as they “stockpile” wines in anticipation &/or hope.”
- To value TWE if China reopens will largely depend on the detail, but the incremental upside could easily see the stock test its 2023 high, around 20% higher, i.e. we have no plans to sell at this stage.
MM remains long and bullish toward TWE
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