Credit Suisse’s channel checks indicate the luxury wine market in China is not showing any meaningful sign of recovery. Business people appear unprepared to gather and “banquet”.
Home consumption is improving but luxury purchases are not being made. Hence, demand for Penfolds is soft and it may take time to absorb the quantities in the market.
Hence, the broker suspects Treasury Wine may curtail shipments to China for the first half.
If the market takes longer to recover, restructuring and bad debt charges may be necessary, in the broker’s view.
Neutral rating retained. Target is reduced to $9.35 from $10.85.
Sector: Food, Beverage & Tobacco.
Target price is $9.35.Current Price is $10.06. Difference: ($0.71) – (brackets indicate current price is over target). If TWE meets the Credit Suisse target it will return approximately -8% (excluding dividends, fees and charges – negative figures indicate an expected loss).