On Monday, Treasury Wine Estates (OTC:TSRYF) Limited (TWE:AU) (OTC: TSRYY) shares saw its price target increased by Jefferies from AUD14.00 to AUD16.00. The company retained its Buy rating, with the firm's expectations now incorporating potential gains from the reopening of China. The financial institution projects a minimal impact on the company's FY24 earnings but foresees a substantial rise in EBITS over the longer term.
According to the analyst's statement, Treasury Wine Estates previously generated approximately AUD200 million in EBITS from the Chinese market. With the assumption that around 40% of this could be regained through volume and price, this would translate to an approximate AUD2.00 per share valuation increase, using a reasonable multiple for Penfolds earnings. The analyst also noted adjustments to the company's earnings per share (EPS), predicting an approximate 4% increase in FY25 and around 7% in FY26.
The revised estimates and the upgraded price target are in line with the changes in the firm's discounted cash flow (DCF) model, which now reflects a price target of AUD16.00, up from the previous AUD14.00. This adjustment is rooted in the anticipation of a significant EBITS uplift by approximately AUD88 million by FY27, as the Chinese market reopens and contributes to the company's financial performance.
Treasury Wine Estates has a history of substantial earnings before interest and taxes (EBITS) from its operations in China. The market's reopening presents an opportunity for the company to recover some of the lost revenues and improve its financial outlook in the coming years.
The firm's analysis points towards a positive trajectory for Treasury Wine Estates, bolstered by the potential resurgence in the Chinese market. The company's stock price target has been adjusted to reflect these expectations, with the maintained Buy rating indicating confidence in the company's ability to capitalize on these developments.
InvestingPro Insights
Recent data from InvestingPro underscores the financial landscape for Treasury Wine Estates Limited (OTC: TSRYY). With a market capitalization of $6.59 billion and a P/E ratio of 39.15, the company's valuation reflects its robust standing in the market. The adjusted P/E ratio for the last twelve months as of Q2 2024 stands at 31.84, signaling investor confidence in the company's earnings potential. Moreover, the company's revenue for the same period was reported at $1.699 billion, with a gross profit margin of 42.07%, showcasing its ability to maintain profitability.
InvestingPro Tips highlight that Treasury Wine Estates is trading at a high earnings multiple and a high EBITDA valuation multiple, which may be of interest to investors seeking growth opportunities. Additionally, the company's liquid assets surpass its short-term obligations, and it operates with a moderate level of debt, indicating a stable financial position. For those intrigued by these insights, there are more tips available on InvestingPro, including an analysis predicting the company will be profitable this year and has been profitable over the last twelve months. The company has also shown a strong return over the last three months, which could be a promising sign for potential investors.
To access a comprehensive set of tips and real-time metrics for Treasury Wine Estates, visit https://www.investing.com/pro/TSRYY. For a deeper dive, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking even more valuable insights. There are 7 additional InvestingPro Tips available, providing a broader perspective on the company's performance and potential investment opportunities.
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